Court Approves Lionel’s Bankruptcy Plan and Settlement with MTH by Erol Gurcan
In what should be one of their last court appearances, lawyers for MTH, Lionel and Sanda Kan (Lionel’s principal manufacturer of trains) appeared in a New York Bankruptcy Court on March 27th.
At the end of the hearing, Judge Burton Lifland approved Lionel’s confirmation plan for reorganization. The court also approved Lionel’s settlement with MTH.
Click the link below to read on
Under the confirmation plan, Lionel’s unsecured creditors will be paid 100% of their claims in cash and with post petition interest. This is usually unheard of when a corporation exits bankruptcy. Creditors are usually paid pennies on the dollar.
Lionel’s attorney Adam Harris informed Judge Lifland that they had acquired 59 million dollars in new equity from Guggenheim funding, and obtained another 10 Million in funding from Train Acquisition LLC, in order to pay off all debts in preparation for exiting from bankruptcy. Train Acquisition LLC manages the Lionel account for the estate of Martin Davis, which owns 75% of the company. (Twenty percent is owned by rock and roll singer Neil Young, with Richard Kughn owning the other 5%).
The only party that filed papers objecting to Lionel’s bankruptcy plan was its principal supplier, Sanda Kan Industrial Ltd. However, their objections were withdrawn after a written agreement was worked out by the attorneys prior to appearing in court today.
The practical effect of Lionel’s plan being confirmed today is that they should be emerging from bankruptcy as early as next week, and most likely within a couple weeks. Lionel’s attorney, Adam Harris expected Lionel to be out of bankruptcy “within two weeks” once the final small details are resolved. Lionel CEO Jerry Calabrese told me today he believed Lionel would be out of bankruptcy “sometime within one month.” Once this occurs, Lionel will be issuing a press release. They have been in bankruptcy since November 15, 2004.
Judge Lifland noted today that “Lionel has thrived while they have been in bankruptcy.”
The court also approved Lionel’s settlement with MTH concerning BOTH the trade secrets lawsuit and patent infringement claim involving synchronized smoke. Part of the bankruptcy confirmation plan includes a one time cash payment to MTH in settlement of both claims. This will take place shortly after Lionel emerges from bankruptcy. The settlement, once paid, will end eight years of litigation in the trade secrets case. Judge Lifland stated he believed the settlement was “fair and just.”
In sum, the long and difficult legal battles between the two model train rivals should soon be history.
Read the Associated Press story about the settlement here.
Related posts:
- MTH Settles Lawsuit with Korea Brass
- Neil Young And Lionel To Buy Out Partner Of Creative Trains
- Lionel Execs Get Pay Raise
- Bankruptcy Court Grants Lionel 7th Extension: MTH Motion to Extend TRO Granted by Erol Gurcan
- MTH Attempts To Collect $$$ From Korea Brass by Erol Gurcan
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2 Responses to “Court Approves Lionel’s Bankruptcy Plan and Settlement with MTH by Erol Gurcan”
Check out our latest blog on the Lionel bankruptcy case.
http://www.thedeal.com/dealscape/2008/05/lionel_long_may_you_run.php
Posted by: Greg Johnson | May 5, 2008 at 3:57 PM
Check out our latest blog on the Lionel bankruptcy case.
http://www.thedeal.com/dealscape/2008/05/lionel_long_may_you_run.php
Posted by: Greg Johnson | May 5, 2008 at 3:57 PM