After agreeing to several loan amendments and three forbearances, lender GE Capital Corp., represented by Paul, Hastings, Janofsky & Walker partner Jesse H. Austin III, appears poised to collect on the approximately $108 million—and possibly more—it is owed by the nation's largest privately held envelope company.

That's because NEC Holdings Corp., a Uniondale, N.Y.-based envelope manufacturer with operations in Austell and other parts of the country, on June 10 filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court for the District of Delaware.

Bankruptcy documents indicate the filing comes after a truncated move to sell the company, which pushed it into default with its lender in mid-May.

But it doesn't look as if NEC, the holding company for envelope manufacturer National Envelope Corp., will stay in Chapter 11 long. Austin said the primary goal behind the bankruptcy filing was to position the company to sell itself via a 363 sale within the bankruptcy. A 363 sale allows purchasers to acquire NEC's assets, but—unlike in a sale outside bankruptcy—gives lenders the potential to leave behind certain liabilities such as environmental liabilities. The filing also opened the way for NEC to receive a quick shot of debtor-in-possession funding—enough to keep the company operating until it can be purchased by private equity investor The Gores Group, with which it has a June 4 letter of intent, before the end of August.

NEC has received a judicial nod for that funding; the court approved a $138.9 million senior secured, super priority DIP facility from pre-petition lender GE Capital on Friday. The agreement, Austin said, essentially serves as a refinancing—known as a roll-up—of NEC's existing, defaulted debt, which has three components: a revolving credit loan with $70 million outstanding, through which NEC can borrow an additional $10 million; a $38 million Term A loan and a $35 million Term B loan, also known as a "last out" loan, meaning all of the proceeds to the GE Capital lenders must be paid in full before any Term B loan holders get their recovery.

A DIP agreement attached as an exhibit in one of the court files lays out a series of milestones NEC must meet, including: execute a definitive asset purchase agreement for a 363 sale before July 2; hold an auction by Aug. 23; and close on the sale, once it is authorized by the court, by Aug. 31.

Austin worked on the case with Paul, Hastings associate Cassie Coppage. NEC's bankruptcy counsel are from Young Conaway Stargatt & Taylor in Wilmington, Del., and Latham & Watkins in Chicago. Fulbright & Jaworski serves as special counsel.

The company, which was founded in 1952 by Holocaust death camp survivor and Polish immigrant William Ungar, filed for Chapter 11 protection for 28 entities around the country, including its Georgia affiliate, National Envelope-South. It still is a family-owned business, and according to court documents, began growing via strategic acquisitions in 1991.

The company employs more than 3,300 workers, produces an estimated 37 billion envelopes per year and holds a 21 percent share of the $3.7 billion North American envelope market.

But, as CFO James Shelby Marlow noted in his declaration, over the past three years the company has been hard hit by "the global recession and the displacement of traditional print communications and media by electronic formats."

Consolidated net sales have fallen from $866.8 million in 2007 to $676.2 million in 2009. The company has posted net losses every year since 2007, although it has stemmed that deficit somewhat thanks to layoffs, facility sales and other restructuring efforts.

In addition to secured creditor GE Capital, the company also owes about $89 million to unsecured trade creditors, according to court filings, including $43 million to International Paper Co. in Memphis, $2.7 million to Neenah Paper Inc. in Alpharetta and more than $500,000 to printing and imaging company Pitman Co. in Kennesaw.

Austin said the lenders were patient with NEC in part because the company has had a long relationship with GE Capital, which "tries to work with its borrowers as much as possible, and if you're the senior lender and have last-out dollars behind you, you have some level of comfort."

He also pointed out that NEC's story was compelling: Ungar, the company's founder, "came to the United States with effectively nothing and built this business. He is still alive, he's still chairman of the board, he's 91 or 92. The other board members are his four daughters. There's a good history there; it is not something you go out and immediately abandon because it runs into some problems. Unfortunately, we're not using envelopes like we used to."

The case is NEC Holdings Corp., No. 10-11890.

Wendy Hagenau, formerly a Bryan Cave partner, has been appointed to a judgeship with the U.S. Bankruptcy Court for the Northern District of Georgia.

Hagenau, a bankruptcy and restructuring lawyer, has represented both debtors and creditors in Chapter 11 cases. She’s also handled receivership actions, workouts and general commercial litigation, including dischargeability litigation.

She graduated from Duke University’s law school in 1983 and joined Powell Goldstein Frazer & Murphy in 1988, prior to the firm’s 2009 merger with Bryan Cave.

Mark I. Duedall compares distressed asset deals to "a warehouse full of bananas."

That's a reference to how quickly the value of a financially troubled company can spoil as key employees leave, business declines and suppliers demand cash as the company attempts to get its affairs together, regardless if it is in bankruptcy protection.

Duedall and two other lawyers at Hunton & Williams, Amy Alcoke Quackenboss and David M. Fass, have been dealing with a lot of banana-filled warehouses lately. They most recently represented CIT Group/Business Credit Inc., a secured lender, on the sale of two bankrupt companies completed under Section 363 of the U.S. Bankruptcy Code.

Operating under the warehouse-of-bananas philosophy, both deals closed quickly—within about three months of the companies' Chapter 11 filings.

According to the bankruptcy documents, when Springdale, Ark.-based National Home Centers, a supplier of construction materials, filed for Chapter 11 protection in U.S. Bankruptcy Court for the Western District of Arkansas in December, it owed about $4 million to CIT and about $11 million to another secured creditor. When Pelham, Ala.-based Moore-Handley Inc., a building and hardware materials distributor, filed in U.S. Bankruptcy Court for the Northern District of Alabama in July, it owed CIT about $17.5 million.

As Quackenboss put it, the lawyers' role when representing secured lenders in situations like this is to "hope and pray that we get our money out."

For the most part, they did. National Home Centers sold in April to a competitor, Raleigh, N.C.-based Stock Building Supply, for about $15 million. Duedall said that all secured lenders in this action were paid in full, with money left over for the unsecured creditors. Moore-Handley sold in October, also to a competitor, Knoxville, Tenn.-based House Hasson Hardware, for $14.5 million. In this sale, Duedall said, CIT got all of the proceeds less a small amount for employee severance payments and post-closing wind-down costs.

"Whenever you're in a distressed transaction, what every party needs to understand is the secured lender wants to understand the exit … and what is the credible path to get there," Duedall said.

If those questions aren't answered quickly, a secured creditor will move to get its collateral back—through, for example, a 363 sale, which is the sale of an asset in bankruptcy. "The goal is to keep the company alive long enough to maximize your value," said Quackenboss. "As a secured lender, you can't just use a Chapter 11 to sell your assets. There has to be some payment to the estate … to the unsecured creditors, the administrative creditors—the sale cannot just benefit the secured lender."

Lawyers for the secured lender, she said, have to get consensus with counsel for the unsecured creditors, the unsecured creditors' committee and the debtors.

In both the National Home Centers and Moore-Handley bankruptcies, Duedall said, his team realized that the best way to get buy-in from the unsecured creditors committees—largely made up of vendors to the building and hardware supply companies—was to work to keep the debtors up and running so they could continue to buy from these vendors, rather than pushing for liquidation.

In the National Home Centers case, Quackenboss said, the secured lender had to battle with unsecured lenders who thought the business was worth more than the $15 million that stalking horse bidder Stock Building Supply was offering. Then, a second bidder came on the scene and wanted to delay the auction process by six weeks to complete due diligence.

"We had to get with the creditors committee, we had to get with the debtor to form a consensus over what to do," Duedall said. Ultimately, the parties decided to move forward without the late-coming bidder because, he said, so much money was going out the door on professional fees and other expenses that waiting—even for a potentially higher bid—would have been too costly.

In Moore-Handley, Duedall said, a competitor at first wanted to buy the company for just $10.5 million. Another buyer, House Hasson, came to the table two weeks prior to the auction and offered to pay more. But, unlike the first buyer, Duedall said, House Hasson planned to lay off several hundred warehouse employees.

As counsel to the secured lender, he said, the Hunton lawyers told the late-coming bidder that its plan would pass severance costs on to the bankruptcy estate of several hundred thousand dollars—something that was unacceptable unless the sales price was higher. House Hasson eventually agreed that its bids would always be $600,000 to $700,000 higher than those of other bidders at every stage of the auction, Duedall said, and eventually House Hasson placed the winning bid—which was some $4 million higher than the original bidder's offer.

National Home Centers was represented by attorneys from Wright, Lindsey & Jennings in Little Rock, Ark. Its buyer, Stock Building Supply, was represented by Skadden, Arps, Slate, Meagher & Flom attorneys. Moore-Handley was represented by attorneys from Bradley Arant Boult Cummings in Birmingham, Ala.; its buyer, House Hasson, was represented by lawyers from Maynard Cooper & Gale in Birmingham.

Card-and-party-supply store Swoozie's has been sold at auction for $2 million more than a stalking horse bidder had offered for the bankrupt company.

At an auction held in a conference room at the offices of Swoozie's counsel, Alston & Bird, Northbrook-Ill.-based Hilco Merchant Resources in-house counsel Joseph A. Malfitano tendered the winning bid of $7,425,000 to purchase Atlanta-based Swoozie's.

Hayden Kepner Jr. of Scroggins & Williamson represented the stalking horse, Newton, Mass.-based Hudson Capital Partners, which had posted a starting bid of $5,435,000. The inventory, according to court records, was valued at about $18.4 million.

A stalking horse bidder is one chosen by a bankrupt company from a pool of contenders that—in exchange for some downside protections if it doesn't tender the winning bid—launches bidding on the asset at an agreed-upon starting price, effectively protecting the seller from lowball offers. Attorneys involved in the deal said that stalking horse bidders get outbid roughly 30 to 50 percent of the time.

Kepner said Hudson Capital got a breakup fee of $75,000 since it did not end up buying Swoozie's. He said he was surprised that his client didn't win the day, but he knew competition would be stiff because there were several other bidders—Gordon Brothers Group/Gordon Brothers Retail Partners and Great American Group, in addition to Hilco—all of which are major liquidators.

"There's not a lot of liquidations going on in a lot of retail chains, so you had a lot of competition for this one" simply because liquidators were looking for something to do, he said. "The price was significantly higher than we thought it would go. It's good for the creditors, but it doesn't do the debtor much good."

The company's largest secured creditor, Wells Fargo, is owed more than $3 million, Kepner said.

The winning liquidator, Hilco, on Tuesday launched "Going out of business" sales at 43 Swoozie's stores around the country. Five of those stores are in the Atlanta area. Under the terms of the agreement, Hilco may supplement Swoozie's existing inventory, but 75 percent of the new items must come from Swoozie's usual vendors.

During the auction, Kepner said, the bidders established specific bidding procedures and a bidding order and agreed to make bids in $100,000 increments. After that orderly beginning, he said, an auction becomes "pretty free flowing," with bidders attempting to tailor contract terms to their liking. In this auction, for example, his client wanted to purchase Swoozie's intellectual property—including its name and customer lists—and its lease designation rights. Winning bidder Hilco did not purchase those assets, which the court record indicates will be sold separately.

Kepner said the sale was structured essentially as an agency agreement. Hilco, he said, did not actually buy the inventory because it couldn't do so legally.

"The landlord is going to have all sorts of prohibitions on somebody else coming in and selling things other than the tenant," he said. "So legally they enter into an agency agreement where the liquidator acts as an agent for the tenant to sell the stuff, and they guarantee a certain fee, which conceptually is the same as buying all the inventory at a certain price, but technically they're not taking ownership of it."

If sales get above a certain level, he said, some of the proceeds will be shared with the debtor.

The auction process itself was a calm one, Kepner and Malfitano said, with Swoozie's financial adviser, Clear Thinking Group, running the process.

"There's not somebody who's standing up there doing the patter," Malfitano said. He said the auction got started at about noon and ended around 6 p.m. on March 25. U.S. Bankruptcy Judge C. Ray Mullins approved the sale on Tuesday.

Swoozie's counsel at the auction, Wendy R. Reiss of Alston & Bird, did not return calls seeking comment. The official committee of unsecured creditors was represented by Darryl S. Laddin of Arnall Golden Gregory.

The auction took place only 23 days after Swoozie's filed for Chapter 11 reorganization on March 2. John W. Mills III of Barnes & Thornburg, who did not attend the auction but served as outside counsel to winning bidder Hilco, said people have been asking him why the sale moved so quickly.

"Easter is coming, Mother's Day, Father's Day, high school and college graduations, weddings," he said, noting big sales opportunities for Swoozie's products. "That's what drove the sale and why it was done on this timetable."

Two Georgia-connected newspaper companies that recently emerged from Chapter 11 bankruptcy reorganizations have wound up their legal proceedings—which means it is time to pay their lawyers.

The newspaper companies are Augusta-based Morris Publishing Group, owner of 13 daily newspapers, including The Augusta Chronicle and Savannah Morning News, and Lexington, Ky.-based Triple Crown Media Inc., operator of six daily and one weekly newspapers in Georgia, including the Gwinnett Daily Post and the Rockdale Citizen.

Morris Publishing filed its case in U.S. Bankruptcy Court for the Southern District of Georgia on Jan. 19. Augusta-based debtors' counsel Hull Barrett is requesting $138,519 in fees from the time of the filing through March 1.

The top hourly rates were $270 for Mark S. Burgreen and $235 for David E. Hudson and James B. Ellington.

Debtors' counsel Neal, Gerber & Eisenberg, based in Chicago, is requesting $233,303 in fees for the same time period.

The top hourly rate was $725 for David S. Stone.

Augusta-based James T. Wilson Jr., the court-appointed attorney for the debtor, has requested $32,410 in fees; his hourly rate is $350.

Morris emerged from bankruptcy earlier this month, 42 days after filing its case. The case moved quickly because Morris filed a pre-packaged bankruptcy, meaning that most of the creditors agreed with the terms prior to the filing.

This allowed the company to cut its debt from $418 million to $107 million, and to execute a swap of $100 million in notes due in 2014 for the cancellation of about $278.5 million in notes due in 2013. Other Morris entities also agreed to make an $85 million capital contribution and to repay $25 million in inter-company debt, according to court records.

Triple Crown emerged from bankruptcy in December, after filing for reorganization in September 2009 in U.S. Bankruptcy Court for the District of Delaware.

Wilmington, Del.-based debtors' counsel Morris, Nichols, Arsht & Tunnell recently received court approval for final compensation of $83,732 in fees incurred between September and December 2009.

The top hourly rate was $725 for Robert J. Dehney.

Debtors' counsel Dinsmore & Shohl, based in Cincinnati, received court approval for $239,360 in fees billed from September to December.

The top hourly rate was $465 for Charles F. Hertlein Jr. and Tim J. Robinson.

Triple Crown, which also filed a pre-packaged plan, assumed and reinstated about $40 million of existing first lien debt, with plans to repay other creditors in full. The company also exchanged about $35 million in second lien senior debt for $10 million in new second lien secured notes and common stock in the reorganized company; it also exchanged $27 million in existing convertible preferred stock for new common stock in the reorganized company.

Bankruptcy filings in federal courts across the nation rose nearly 32 percent last year, according to data just released by the Administrative Office of U.S. Courts. The total number of bankruptcies filed rose to more than 1.4 million. Chapter 11 filings rose 50 percent, to 15,189; Chapter 7 filings rose 41 percent to just more than 1 million; and Chapter 13 filings rose 12 percent, to nearly 407,000. For more data and charts, visit the Administrative Office of the U.S. Courts Web site.

Swoozie’s Inc., the bankrupt Atlanta-based purveyor of paper products, party supplies and gifts, has found a stalking horse bidder which could purchase its assets at auction with a starting bid of $5.34 million.

The stalking horse, Newton, Mass.-based Hudson Capital Partners, is one of more than 40 strategic, going-concern and liquidation buyers—including Books-A-Million and Tiger Capital—that Swoozie’s courted in its search for a way out of its financial difficulties.

That’s according to recent filings in Swoozie’s Chapter 11 reorganization case in U.S. Bankruptcy Court for the Northern District of Georgia.

Swoozie’s, which lists debts between $10 million and $50 million and assets of less than $10 million, is represented by Dennis J. Connolly, Wendy R. Reiss, William S. Sugden and Sage M. Sigler at Alston & Bird. Hudson Capital is represented by J. Hayden Kepner Jr. at Scroggins & Williamson. 

Court documents show that Swoozie’s is slated to hold the auction on March 25. Time is of the essence, because U.S. Bankruptcy Judge C. Ray Mullins has approved up to $3.5 million in debtor-in-possession financing from Wells Fargo that matures on April 15. That loan is in default, according to court documents, if a sale hearing is not held by March 29.

Founded in 1999, Swoozie’s grew to 43 stores around the country, but got into trouble after it purchased 13 stationery-and-party-products stores known as Blue Tulip out of bankruptcy about a year ago. Swoozie’s predicted an additional $12.8 million in sales as a result of the acquisition—but actual sales came up more than $4 million short, according to bankruptcy filings. Then, a “seismic shift in the economy” and a delay in closing a $3.1 million loan from Wells Fargo, according to court documents, prompted the company to file for bankruptcy.

Court documents contemplate that other bidders may bump Hudson Capital out of the running in the proposed Section 363 sale. If that happens, an agency agreement provides for a $75,000 break-up fee.

Other lawyers involved in the deal include Darryl S. Laddin and Michael F. Holbein at Arnall Golden Gregory as counsel to the Official Committee of Unsecured Creditors; James S. Rankin Jr. at Parker, Hudson, Rainer & Dobbs for Wells Fargo; and Mark I Duedall at Hunton & Williams for interested parties Gordon Brothers Group and Gordon Brothers Retail Partners.

The case is In re: Swoozie’s Inc., No. 10-66316.

James P. Smith, who became the Middle District of Georgia's newest bankruptcy judge on Feb. 22, said he first got a lead on his current job at a Super Bowl party two years ago.

At that party, he ran into Robert F. Hershner Jr., a Middle District bankruptcy judge who told Smith he was planning to retire soon. When Hershner submitted his letter of resignation, the 11th U.S. Circuit Court of Appeals, which is responsible for vetting and appointing bankruptcy judges, announced an opening. Smith filed an application for the post and got the job last month.

Hershner and Smith share a legal legacy of sorts. The two had both practiced law with Macon lawyer Jerome L. Kaplan, although at different times. Hershner left Kaplan's firm in 1980 to go on the bankruptcy bench; Smith joined that firm, then known as Kaplan & Thomason, a year later, right after getting his law and M.B.A. degrees from the University of Georgia.

In 1985, the firm became the Macon office of Arnall Golden Gregory, where Smith said he spent 20 years handling business litigation and representing institutional creditors in bankruptcy matters. But in 2005, Arnall decided to close the office, and Smith, along with Kaplan and Ronald C. Thomason, joined former Arnall partner Ward Stone Jr., who'd left earlier to found his own firm, Stone & Baxter. At the smaller firm, Smith's practice became more focused on business debtors in Chapter 11 reorganizations.

Smith credits Kaplan with mentoring him and Hershner in their careers, calling his former colleague “the producer of bankruptcy judges.”

Smith's tenure as a bankruptcy judge really began on Monday, when he heard his first cases. Asked how things were going so far, he quipped, “Well, nobody's died yet.”

Bankrupt Mesa Air Group Inc. wants to keep Jones Day as its outside lawyers, according to an application Mesa filed with the U.S. Bankruptcy Court for the Southern District of New York.

Jones Day, according to the filing, represents Mesa in a wide range of pre-petition litigation against Delta Air Lines and United Airlines Inc. In the past year, the firm has billed Mesa nearly $1.7 million for its services.

The filing lists the primary Jones Day lawyers expected to work on the litigation, along with their hourly rates. Among them are four Atlanta lawyers: partners G. Lee Garrett Jr. ($675) and David M. Monde ($625); and associates Robert A. Schmoll ($400) and Jason Burnette ($325).

According to the filing, Jones Day represents the beleaguered airline in four separate legal actions in three states.

Three of those suits were initiated in 2008 in U.S. District Court for the Northern District of Georgia. In one, Mesa and its subsidiary, Freedom Airlines, sued Delta seeking to enjoin Delta's termination of a jet operation agreement. The court issued a preliminary injunction in favor of Mesa, which was upheld by the 11th U.S. Circuit Court of Appeals. The parties now are awaiting a trial date in the district court. In another suit, Mesa and Freedom allege that Delta wrongfully terminated another agreement and are seeking $40 million in damages. The third Georgia suit involves Delta's allegation that Mesa and Freedom breached a “most favored nation” contract provision. In that case, the file of which is sealed, the court has not ruled on Mesa's motion to dismiss.

Mesa also sued Delta in August in federal court in Arizona over the termination of an engine maintenance agreement and Delta's allegedly unauthorized retention of seven aircraft engines. Delta filed a mechanics' lien on the engines and a counterclaim seeking to foreclose on the liens, but the court found that Delta had forfeited its lien claims. Delta has filed a notice of appeal to the 9th U.S. Circuit Court of Appeals; Mesa has a pending motion for summary judgment.

And United, in October, sued Mesa over the parties' code-sharing agreement about the in-service dates for certain aircraft in federal court in Illinois. The suit is pending.

Mesa's bankruptcy court filing seeking to retain Jones Day in these and related actions notes that Mesa's success in restructuring turns on the outcome of these suits, because 96 percent of its passenger revenues for fiscal year 2009 were derived from code-share revenue guarantee agreements with Delta, United and US Airways. “Accordingly, preserving or defending these relationships, and related rights and claims, will be a critical component of the Debtors' overall restructuring in these cases,” the application notes.

Mesa and 10 subsidiaries petitioned for Chapter 11 reorganization on Jan. 5, citing assets of $975 million and liabilities of $869 million. The suit is In re: Mesa Air Group Inc., No. 10-10018.

Sea Launch Co., a bankrupt Boeing subsidiary that propels into space rockets carrying private payloads, on Dec. 3 landed court approval for $12.5 million in debtor-in-possession financing.

The company, represented by debtors' counsel Dennis J. Connolly and Matthew W. Levin at Alston & Bird and attorneys from Young Conaway Stargatt & Taylor in Wilmington, Del., filed an emergency motion for DIP financing with the U.S. Bankruptcy Court for the District of Delaware, claiming that it needed $5 million immediately to continue operations. Sea Launch, which is based in Long Beach, Calif., and has launched the “Rock,” “Roll” and “Rhythm” satellites for XM Satellite Radio as well as satellites serving entities including DirecTV and NATO, sought authority to borrow $25 million, but presented the court with a negotiated commitment for $12.5 million.

It's not easy to get DIP financing these days, and Connolly credited investment bank Jefferies & Co. with conducting a global search for the money. The lender, whose principal investors are financial entities and players in the space and telecommunications industries, is Houston-based Space Launch Services. It was represented by attorneys from Baker Botts and Edwards Angell Palmer & Dodge. Boeing, which is a guarantor on some of the loans, is represented by Richards, Layton & Finger.

Bankruptcy Judge Brendan L. Shannon approved the $12.5 million loan, writing that Sea Launch may use the money to fund operating expenses, working capital, transaction fees associated with the loan and professional fees and expenses—including legal fees—subject to court approval and not exceeding $350,000 per month in the aggregate.

Shannon also noted in his order that the debtors were unable to obtain unsecured credit, or secured credit at better terms, elsewhere.

That's not surprising, given Sea Launch's financial state. The company reported in its bankruptcy petition and other documents liabilities in excess of $1 billion and assets that were less than $500 million.

According to an affidavit filed early in the bankruptcy by Sea Launch's chief financial officer, the company owes Boeing more than $760.8 million; Boeing's most recent 10-Q, filed with the Securities and Exchange Commission in October, indicates that Boeing has recourse to $971 million in receivables from Sea Launch and its partners. Sea Launch also racked up an additional $119 million in cost overruns during its development phase, among other debts.

Another factor pushing the company to reorganize, according to the court file, is a failed launch, which took place in January 2007 when an accident destroyed a rocket and a Dutch telecommunications satellite before they even left the launch pad. That unsuccessful launch delayed other scheduled launches, costing the company money and customers.

The customer on the failed launch, Hughes Network Systems, demanded a refund of its advance payments and interest. This spring, a panel of arbitrators concluded that Sea Launch owed Hughes $52.3 million. Connolly said Hughes filed to confirm the arbitral award in superior court in California, but that action is stayed during the pendency of the bankruptcy litigation.

With debts looming, Sea Launch filed for Chapter 11 reorganization in June, and asked the court for DIP funding in November.

The commitment letter and the term sheet for Sea Launch's DIP facility, which are exhibits in the court file, show that this is a super priority priming secured term loan, meaning that its repayment takes precedence over Sea Launch's other secured debts. The interest rate is based on a minimum 3 percent London Interbank Offered Rate, or LIBOR, plus 300 basis points, and Sea Launch will pay a closing fee of 2 percent. If at some point the company elects to get credit from another lender instead of completing its commitment with Space Launch Services, it will pay a break-up fee of $250,000.

Connolly said his client expects to receive the remaining $7.5 million in DIP financing within the next 30 to 60 days. He said the search is on for more funding.

“This is a unique debtor,” he said. “There really isn't another provider quite like it in the world.”

Mentioning the specialized skill sets necessary to operate the business, not just from a scientific standpoint but from the perspective of dealing with multinational treaty obligations related to Sea Launch's peaceful use of rockets that possess weapons-potential technology, he added, “I think there will be interest among equity players because there's an amalgam of assets that isn't easily replaceable and has a value that will be of interest. The challenge is figuring out how to translate that into a financing structure.”

Sea Launch was founded in 1995 by Boeing Commercial Space and Communications, Norwegian investors and corporations owned by the governments of Russia and Ukraine. The company was designed as a private, low-cost alternative for launching satellites, most of which, at that time, were launched out of government facilities with long waiting lists.

To date, the company has completed about 30 launches, including one for Georgia-based Intelsat on Nov. 30. The launches either take place from a land-based launch pad at a space center in Kazakhstan or from the Odyssey, a huge, sea-based, floating launch pad at the equator (satellites launched at the equator get the biggest boost from Earth's rotation and travel the shortest route into orbit).

But the economy has changed since the company's founding in the go-go mid-1990s.

“The debtors are actively pursuing launch opportunities with numerous customers,” Brett A. Carman, Sea Launch's vice president and chief financial officer, said in an affidavit filed with the court. “However, the Debtors' operating results have been negatively impacted by the worldwide economic recession, a glut of available launch slots operated by competitors, and the Debtors' precarious finances.”