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A Delaware judge on Thursday approved an $8.5 million settlement between National Waste Services of Virginia Inc. and Virginia’s Page County. Judge Peter Walsh in the U.S. Bankruptcy Court for the District of Delaware in Wilmington approved the deal after the U.S. Trustee’s sole objection over releases was resolved, said Michael Busenkell, debtor counsel in Wilmington at Morris, Nichols, Arsht & Tunnell. “The debtor agreed not to give releases to any insiders and they agreed not to give any to the debtor, and the trustee’s objection was resolved,” he said. National Waste filed for Chapter 11 on March 4, 2004, after Page County revoked its permit to operate the 66-acre Battle Creek landfill in Luray, Va. The waste hauler quickly hit a cash crunch once its main revenue source was shuttered. The situation erupted into a dispute over the contract to use the landfill. Under the settlement, Page County will make an $8.5 million payout to National Waste on June 1 and then take back the landfill it leased to the company in December 2001. The Little Creek, Del.-based waste hauler’s Chapter 11 petition would then be converted to Chapter 7 liquidation. The settlement was forged by National Waste, its creditors, senior lender CapitalSource Finance LLC, Page County and the Virginia Department of Environmental Quality. CapSource pulled its motion to appoint a Chapter 11 trustee to oversee management as part of the agreement. Chevy Chase, Md.-based CapSource is scheduled to recover about $7.2 million on its estimated $24 million secured claims as both prepetition and debtor-in-possession lender. National Waste will then distribute the $1.3 million balance of the payout. Unsecured creditors are scheduled to receive a $300,000 cash payout for a 20 percent recovery on their estimated $1.5 million in claims, while shareholders will split $250,000. About $353,000 of the balance would revert to Page County in two payments, while $400,000 would be put toward administrative expenses to fund professional fees. U.S. Trustee Kelly Beaudin Stapleton objected to the proposed preconfirmation releases for the debtor’s parent, National Waste Services Inc., CapSource, the creditors’ committee and other parties under the settlement. The settlement was thus “the archetype of a sub-rosa plan” without the protections provided by a disclosure statement and plan confirmation, the objection said. Walsh also approved plans by the waste hauler to sell its remaining equipment in one or two public auctions or private sales under the agreement, he said. National Waste was granted approval to retain auctioneer Tauber-Arons Inc. of California at a rate of 10 percent of the gross sale proceeds, documents show. CapSource provided a $17 million credit facility and a $4 million DIP and had an estimated $3 million in additional claims tied to guarantees from nondebtor third parties. Busenkell, Robert Dehney and Alicia Davis are lead debtor counsel in Wilmington at Morris Nichols. Gary Seitz, Daniel Astin and Anthony Saccullo represent the creditors in Wilmington at Bayard Firm. Jeffrey Jonas and Meghan Walt are Boston counsel for CapSource at Brown Rudnick Berlack Israels, while Jeffrey Wisler is Wilmington co-counsel at Connolly Bove Lodge & Hutz. Copyright �2005 TDD, LLC. All rights reserved.

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