Judge OKs Budget Sale to Cendant

On Friday, a judge in Delaware approved the $3.4 billion sale of most of the assets of Daytona Beach, Fla.-based Budget Group Inc. to New York financial services and travel giant Cendant Corp. Cendant is slated to pay $110 million in cash and assume a $2.7 billion fleet financing agreement; it emerged as the sole bidder under a � 363 auction under the U.S. Bankruptcy Code in October.

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A judge on Friday approved the $3.4 billion sale of most of the assets of Budget Group Inc. to New York financial services and travel giant Cendant Corp. Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware in Wilmington said she would sign an order authorizing the sale of the bankrupt car rental company, said Harold Marcus, lead counsel for the creditors committee at Brown, Rudnick, Berlack, Israels in Boston. Cendant is slated to pay $110 million in cash and assume a $2.7 billion fleet financing agreement; it emerged as the sole bidder under a court-supervised � 363 auction in October. “There were just some minor clarifications, and Judge Walrath indicated she would sign the order by [Friday] afternoon,” Marcus said. The parties turned to a � 363 auction under the U.S. Bankruptcy Code to finalize a deal before filing a reorganization plan. But other agreements still have to be crafted between Budget and Cendant on assets in Europe, the Middle East and Africa, he explained. “Those [overseas] assets aren’t considered to be the most significant part of the business, and a valuation still has to be worked out,” he said. While Budget has yet to file a disclosure statement outlining plans for final distribution, the car rental company will be back in court before Walrath on Nov. 20. Budget seeks a temporary injunction seeking to stall a fraud suit because it would interfere with the company’s ability to file a plan. The suit was filed Oct. 25 by 5331 S. Cicero LLC in Circuit Court of Cook County, Ill., and alleges Budget officers falsely stated in 2001 that their company was solvent and had no plans to file for bankruptcy protection. It charges that Peter Wempel, Budget’s vice president of airport affairs, properties and facilities, falsely claimed that Budget’s financial situation was strong in official documents it presented to Cicero. Cicero asserts that it relied on this information when it paid $3 million for Illinois real estate leased by Budget. Cicero then leased the property back to Budget, but the rental car company has been trying to reject this agreement since it filed Chapter 11 on July 29. Cicero is alleging fraud, consumer fraud and negligent misrepresentation, filings show. “Budget had a lease on the property, and Cicero wanted to make sure that Budget could fulfill the terms of the lease, and Budget knew or should have known at that time that its financial situation was precarious when Mr. Wempel stated otherwise,” said Joseph Grey, Wilmington counsel for Cicero at Stevens & Lee. “Cicero then relied on that misleading information to acquire the property.” “The defendant is not being asked to forego its prosecution of the LLC action, but merely to delay it until a plan of reorganization is confirmed,” Budget said in its request for the preliminary injunction. “We’re arguing that there’s no way or no need for Budget to file a reorganization plan because they’ve sold all their assets,” Grey said. “There are some legal requirements for an injunction, but we don’t think they’ve met them, and we don’t think they’re going to organize.” Lazard is advising Budget, and Larry Nyhan, James Conlan, Matthew Clement and William Evanoff in Chicago are lead debtor counsel at Sidley Austin Brown & Wood. Robert Brady, Edmon Morton, Joseph Malfitano and Matthew Lunn are Wilmington co-counsel at Young Conaway Stargatt & Taylor. Marcus and Peter Antosyzk are counsel to the creditors in Boston with Edward Weisfelner and Leslie Scharft in New York at Brown Rudnick. William Bowden, Christopher Sontchi and Ricardo Palacio are Wilmington co-counsel at Ashby & Geddes. Jefferies & Co. is advising the creditors’ committee Grey at Stevens & Lee in Wilmington and Michael Pomerantz at Brown Udell & Pomerantz in Chicago are Cicero counsel. Copyright �2002 TDD, LLC. All rights reserved.

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