Insolvency Alerts December 2011

Insolvency Alerts December 2011

DECEMBER 22, 2011

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

Money Tree Files for Chapter 11
Lender Money Tree Inc. has filed for chapter 11 protection to restructure nearly $72 million in debt.

Analyst Says Pinnacle Air Has “High Probability” of Bankruptcy
An analyst with Maxim Group LLC said that Pinnacle Airlines Corp., the regional carrier that flies for Delta Air Lines Inc. and others, has a “high probability” of filing for bankruptcy. — Furloughs 154 Memphis workers.

Saab North Americas Hires Consultant, Does Not File for Bankruptcy
Saab North Americas said yesterday that it will not file for bankruptcy, even as its parent company in Sweden has sought court protection this week.

MF Global Holdings Says More Units Move Toward Bankruptcy
MF Global Holdings Inc. won permission to have three more units join it in Chapter 11 bankruptcy, as a lawyer said more units are likely to file for protection from creditors next year.

And in General Economic News

New Construction of U.S. Houses Rose
MarketWatch states that new construction of U.S. houses rose in November to the highest annual rate since April 2010, with multi-family activity leading the monthly growth, according to data released Tuesday by the Commerce Department. Housing starts rose 9.3% last month to a seasonally adjusted rate of 685,000 — the highest annual rate since April 2010. Meanwhile, building permits, a leading indicator of housing construction, rose 5.7% in November to a seasonally adjusted annual rate of 681,000, the highest annual rate since March 2010.

And Now for Something Completely Different
-Some Random Insolvency Thoughts-

(A brand new feature of this Report)

There have been a number of positive economic reports over the past few weeks. The prevailing wisdom is that these signal a strengthening of the nascent economic recovery. For a contrarian view, see the following NY Times article. http://www.nytimes.com/2011/12/22/business/signs-point-to-economys-rise-but-experts-see-a-false-dawn.html?_r=1&hp.

Where’s the truth? We’ll know when we know – if then.

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DECEMBER 19, 2011

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

Saab Files for Liquidation
Saab Automobile filed for liquidation today after its hopes of receiving a life-saving investment from Chinese investors collapsed because of opposition from its former owner, General Motors.

Cayman Island Fund American Pegasus Seeks U.S. Chapter 15
Cayman Island-based investment fund American Pegasus SPC filed for chapter 15 protection as liquidators struggle to chase down some of the $150 million in subprime automobile loans the fund invested in before U.S. market regulators found that the fund was tainted with widespread mismanagement.

William Lyon Homes Files Pre-Packaged Bankruptcy
William Lyon Homes has filed for pre-packaged chapter 11 protection to recapitalize the company by cutting debt, after the U.S. homebuilder won creditor support for its reorganization plan.

Delta Petroleum Files for Bankruptcy
Delta Petroleum Corp. filed for chapter 11 protection today, a month after the U.S. oil and gas producer warned about its liquidity issues.

William Lyon Homes files for pre-packaged bankruptcy
William Lyon Homes has filed for pre-packaged bankruptcy protection to recapitalize the company by cutting debt, after the U.S. homebuilder won creditor support for its reorganization plan. During the reorganization, expected to be completed within 90 days, William Lyon Homes will continue normal business operations. The company said it intended to continue to pay trade creditors and suppliers.

And in General Economic News

Credit Card Defaults Drop Sharply
Credit card defaults dropped so sharply this year that banks may pick up their pace of opening new accounts in 2012. Customers with moderate credit scores should find cards easier to obtain in the coming year. This is thanks in part to the strides that card holders have made in making payments on time. The top six credit card issuers reported data Thursday for November defaults and late payments, and the trends point to the restoration of normal patterns after huge spikes resulting from the economic crisis, according to Moody’s Investors Service.

Deloitte Consumer Index Slides In November, Due to Housing Market
The Deloitte Consumer Spending Index slid again in November, weighed down primarily by the housing market. The Index tracks consumer cash flow as an indicator of future consumer spending. “A high number of foreclosed homes and mortgage defaults continue to deflate real home prices and further lower consumers’ net worth,” explained Carl Steidtmann, Deloitte’s chief economist and author of the monthly Index. “In recent months however, consumers have sustained their spending and the savings rate has declined, while real wages and employment growth remain stagnant.” The Index, which comprises four components – tax burden, initial unemployment claims, real wages, and real home prices – fell to 1.75 from an upwardly revised reading of 1.96 the previous month. The Index is at the lowest level since April 2009. “Many consumers are showing seasonal cheer when it comes to holiday shopping; however, they are also well-informed and making calculated decisions before buying,” said Alison Paul , vice chairman and U.S. retail & distribution sector leader, Deloitte LLP.

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DECEMBER 15, 2011

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

Delta Sees More Consolidation as AMR Cuts Seats
Delta Air Lines Inc. Chief Executive Officer Richard Anderson said that he expects more consolidation across the global industry through additional joint ventures or traditional mergers. [Author’s Note: Might this not also include additional insolvency filings?]

Hartford Computer Group Files for Bankruptcy, Plans $35.5M Sale to Avnet
Hartford Computer Group and its subsidiary Nexicore Services filed for Chapter 11 bankruptcy and plan to sell their operations to computer and electronics distributor Avnet Inc. for $35.5 million.

Furniture Chain RoomStore Files Chapter 11 Bankruptcy
RoomStore Inc., a Richmond, Va.-based home furnishing retail chain, joined a long list of furniture store chains that have reorganized during the weak economy, as the company has filed for Chapter 11 bankruptcy.

American Laser Centers Files Chapter 11, Plans Sale to Lender
American Laser Centers, a Farmington Hills, Mich.-based chain of laser hair removal centers, filed for Chapter 11 bankruptcy and plans a Section 363 sale of its assets to its first priority lender, Bellus ALC Investments.

Snokist Growers To File Chapter 11 After Product Recall, Financing Problems

Snokist Growers, a Yakima, Wash.-based fruit processing company, said it plans to file for Chapter 11 bankruptcy after two years of difficulty securing financing and a negative report from the Food and Drug Administration that led to a product recall.

In General Economic News

U.S. Corporate Bankruptcy Filings Continue Downward Trend
New data released from Epiq Systems Inc. showed that corporate bankruptcy filings in November continued their 2011 slide, falling 9 percent from October and 27 percent from November 2010.

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DECEMBER 14, 2011

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

Fashion-Brand Buyer BP Clothing Files for Bankruptcy Protection Fashion-brand buyer BP Clothing LLC filed for chapter 11 protection on Monday after recession-weary clothing sales forced it to abandon its licenses to sell Baby Phat and Fabulosity clothing lines, cutting off much of its revenue stream.

Roomstore Inc. Files Chapter 11 Bankruptcy
The RoomStore Inc., the last vestige of former home-furnishings giant Heilig-Meyers Co., filed for Chapter 11 bankruptcy protection Monday amid declining sales and mounting debt. The Goochland County-based retailer said it hopes this trip through Bankruptcy Court — it emerged in June 2005 as the final product of its former parent company — will restore the RoomStore to long-term financial health.

And in General Economic News

Automotive Loans Getting Better
The lending environment for automotive loans is getting better for consumers, and fewer people are paying their auto loans late, according to the latest data from TransUnion, one of the nation’s leading consumer credit companies. For the final three months of the year, TransUnion estimates that just 0.51% of people with an auto loan will be 60 days or more past due on their payments, down from a peak of 0.86% for last three months of 2008.

Retail Sales Increase
The start of the holiday shopping season in November helped fuel the sixth straight monthly increase in retail sales. Americans spent more on clothing and electronics, and sales of autos and furniture also rose. Still, the overall gain was the smallest since June. Consumers pulled back on some purchases unrelated to holiday shopping, such as groceries and building materials. Retail sales rose 0.2 percent in November, the Commerce Department said Tuesday. That was lower than October’s gain, which was revised up to show a 0.6 percent increase.

More spending on retail goods shows the economy is continuing to grow steadily, if slowly. The higher sales of furniture and autos suggested that consumers made more big purchases in November. So-called “core” sales, which exclude the volatile categories of autos, gasoline and building materials, rose for an 11th straight month.

Mortgage Debt Drops
U.S. mortgage debt, a driver of consumer spending, dropped to the lowest level in almost five years in the third quarter as foreclosures wipe out home loans and housing purchases fell. The volume of outstanding home mortgages declined to $9.88 trillion from $9.94 trillion at June 30, according to Federal Reserve data released Monday. The reading was the lowest since the end of 2006. Mortgage volume peaked at $10.6 trillion in early 2008, the final months of the decade-long borrowing binge.

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DECEMBER 13, 2011

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

Newspaper Group Lee Enterprises Files for Bankruptcy
Lee Enterprises Inc, which publishes 48 daily newspapers including St. Louis Post-Dispatch, filed for chapter 11 protection to slash its debt load, as newspapers struggle with falling advertisement dollars and dwindling readership.

Furniture Retailer RoomStore Files for Chapter 11
Discount furniture retailer the RoomStore is hoping to reorganize after filing for chapter 11 protection.

And in General Economic News

U.S. Mortgage Debt Drops
U.S. mortgage debt, a driver of consumer spending during the real estate boom, dropped to the lowest level in almost five years in the third quarter as foreclosures wiped out home loans and housing purchases fell. The volume of outstanding home mortgages declined to $9.88 trillion from $9.94 trillion at June 30, according to Federal Reserve data released last week. The reading was the lowest since the end of 2006. Mortgage volume peaked at $10.6 trillion in early 2008, the final months of a decade-long borrowing binge.

Small Business Owners Have Bright Outlook
According to the latest Small Business Pulse Survey results released by PaySimple, the majority of small business owners have a bright outlook when it comes to cash flow in 2012. But despite their optimism, 80% of small businesses are still plagued by late payments. “It’s encouraging that so many small businesses anticipate cash flow improvements in 2012, but the rate of late payments is quite alarming,” said Eric Remer, CEO of PaySimple. “When it comes to payment challenges, keeping track of everything is a struggle for small businesses overall, which seems to directly coincide with small business demand for ease

Confidence Among U.S. Consumers Rises
Bloomberg reported Friday that confidence among U.S. consumers rose more than forecast in December to a six-month high. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 67.7 this month from 64.1 at the end of last month.

U.S. Trade Deficit Narrows in October
AP reports that the U.S. trade deficit narrowed in October to its lowest point of the year after Americans bought fewer foreign cars and imported less oil. The shrinking trade gap boosted growth over the summer and may do so again in the final three months of the year. The Commerce Department said Friday that the trade deficit shrank 1.6 percent to $43.5 billion. It was the fourth straight monthly decline.

Overall imports fell 1 percent to $222.6 billion, which largely reflected a 5 percent decline in oil imports.

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DECEMBER 8, 2011

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

American Laser Centers Files for Chapter 11
American Laser Centers LLC filed for chapter 11 protection along with its parent, as a weak economy dampened demand for its laser hair removal treatments, Reuters reported today. ALC Holdings LLC, the parent of American Laser Centers, said in a court filing that as part of the restructuring process it was seeking to sell the company’s business and assets. American Laser Centers listed estimated liabilities of $100-$500 million and assets of $50-$100 million, according to court filing.

A&P Wins Approval for $490 Million Financing Deal
The Bankruptcy Court Tuesday cleared A&P to tap a $490 million financing package from an investment firm led by supermarket mogul Ron Burkle’s Yucaipa Cos. This forms the backbone of the company’s bankruptcy-exit strategy, Dow Jones Daily Bankruptcy Review reported today. Yucaipa, Mount Kellett Capital Management and funds managed by Goldman Sachs Group Inc.’s asset-management firm are lined up to provide the funding through their purchase of new privately placed notes and stock, proceeds from which will be funneled to creditors as part of A&P’s reorganization plan.

Nevada Cancer Institute Files Chapter 11 Plan Based on Sale
Nevada Cancer Institute filed a chapter 11 plan Tuesday that provides secured lenders with a 35 percent payout on their claims from the proceeds of the sale of the Las Vegas medical center, Dow Jones DBR Small Cap reported today. Under the reorganization plan, secured lenders owed $91 million would receive $18 million in cash from the sale of the medical center plus $13 million in notes, secured by a research building and land, paid out over 5 years.

And in General Economic News

ECB Cuts Key Lending Rate
MarketWatch reports this morning that the European Central Bank Thursday cut its key lending rate by a quarter of a percentage point to 1%. The widely-expected move follows a quarter-point cut in November, fully undoing rate hikes delivered earlier this year. The Bank of England left its rate unchanged.

U.S. Unemployment Claims Dip to 9-Month Low
New claims for unemployment benefits dropped to a nine-month low in the United States last week, a government report showed on Thursday, suggesting the labor market recovery was gaining momentum. Initial claims for state unemployment benefits fell 23,000 to a seasonally adjusted 381,000, the Labor Department said, the lowest since late February. The previous week’s data was revised up to 404,000, from the previously reported 402,000. Analysts note that a recovery in the jobs sector of the economy might lead to an easing of the home mortgage crisis, as more mortgagors would be able to keep mortgages current and, even, to take advantage of historically low mortgage rates and refinance.

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DECEMBER 7, 2011

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

Lehman Brothers Liquidation Plan Confirmed
Lehman Brothers Holdings Inc.’s chapter 11 case is close to wrapping up, The Deal Pipeline reported yesterday. The judge confirmed the Lehman liquidation plan yesterday. The third amended plan separates the creditors of each of the 23 bankrupt affiliates and does not substantively consolidate the debtors. It does, however, reallocate a portion of distributions from certain classes of creditors who would receive a lower distribution with substantive consolidation to creditors that would benefit from this remedy. The plan allows Lehman to unwind its remaining holdings, including real estate, commercial loans and private equity and principal investments, in the years following the effective date of the plan.

And in General Economic News

Financial Crimes Bedevil Prosecutors
David Cardona, who was a deputy assistant director at the Federal Bureau of Investigation in charge of investigating the financial crisis said the government has concluded that many inquiries of wrongdoing by financial executives cannot succeed as criminal prosecutions, the Wall Street Journal reported today. The Justice Department has decided it is “better left to regulators” to take civil-enforcement action on those cases, he said. While at the FBI, Cardona oversaw dozens of criminal probes of large financial firms. The FBI’s probes have not led to any successful prosecutions of high-profile executives in relation to the financial crisis. In contrast, the SEC has filed crisis-related civil-fraud cases against 81 firms and individuals, and it has negotiated almost $2 billion in penalties in cases that have been settled

Rate Of Delinquent Mortgage Holders Should Decline
If the economy does not suffer more setbacks, the rate of delinquent mortgage holders should decline significantly by the end of next year, according to TransUnion. Delinquency rates will likely tick up to about 6 percent through the first three months of 2012, TransUnion said in its annual delinquency forecast issued Wednesday. But by the end of next year, it could drop to 5 percent — well off the peak of 6.89 percent seen in the fourth quarter of 2009. TransUnion’s forecast takes into consideration several factors, including expectations that consumer confidence and the economy will improve next year. Also, banks are expected to get a good portion of pending foreclosures off their books next year, said Charlie Wise, TransUnion director of research and consulting.

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DECEMBER 6, 2011

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

Northampton Generating Files Bankruptcy in North Carolina Northampton Generating Co., owner of a 112 megawatt electric generation facility in Northampton, Pa., filed for bankruptcy protection citing increases in fuel costs.

Getty Petroleum Files for Chapter 11
Gas station operator Getty Petroleum Marketing Inc. filed for chapter 11 reorganization, barely a week after its landlord Getty Realty Corp. threatened to scrap its lease agreement for failing to pay rent, Reuters reported yesterday. Getty Petroleum Marketing is the largest tenant of Getty Realty, which owns and leases convenience stores, gas station properties and petroleum distribution terminals. Getty Petroleum said that it expects to continue to supply its gas stations with gasoline and has enough capital to fund normal operations through its reorganization.

A&P Labor Deal Sparks Concerns from Giant, Stop & Shop
The Giant and Stop & Shop supermarket chains are balking at A&P’s deal with its unionized employees to slash wages and benefits, claiming that they may be forced to pick up the slack with respect to a multi-employer plan the three chains share, Dow Jones Daily Bankruptcy Review reported today. While still required to obtain court approval, grocery-store operator Great Atlantic & Pacific Tea Co. last week earned the support of its union workers for sweeping changes to their collective-bargaining agreements.

And in General Economic News

Overall U.S. Consumer Credit Profiles Largely Unchanged
U.S. consumer credit profiles have remained largely unchanged despite the housing market crash and soaring numbers of foreclosures, according to a recent analysis by the Fair Isaac Corporation (FICO). It found that, despite the obvious credit problems suffered due to the recession, overall consumer credit scores have changed very little over the past six years. “The great majority of Americans continue to pay their bills and manage their credit obligations successfully,” during the downturn, the report reads. Despite the widespread perception that consumer credit was devastated by the recession and the foreclosure crisis, FICO reports that just over 2 percent of all consumers (4.3 million) saw their credit scores fall by more than 150 points from Nov. 2007 to April 2011.

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DECEMBER 5, 2011

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

Lee Enterprises to File for Bankruptcy
Lee Enterprises Inc said it would file for voluntary prepackaged bankruptcy protection before Dec. 12, as the media company struggles to pay off its debt.

Backlash Against Public Entity Bankruptcies
Section 109 of the Bankruptcy Code allows “political subdivisions” or “public agencies” of a state to file bankruptcy – if “specifically authorized . . . by State law” to do so. Two weeks ago, the Harrisburg Pennsylvania bankruptcy was dismissed since state law had not authorized the filing. Recently, the Suffolk County, NY OTB corporation had its filing dismissed on similar grounds.

Takeaway point – Political entities seeing bankruptcy as a way to wipe off inconvenient debt need to make sure that they first get their ducks in line. Absent state law approval, their trip through bankruptcy will be — as Hobbes put it — nasty, brutish, and short. [Clarification: Nasty, Brutish, and Short is not the name Dickens chose for the law firm in Great Expectations.]

And in General Economic News

Foreclosure Backlog Increasing
A report from data-tracker LPS Applied Analytics shows that the average loan in foreclosure has been delinquent for 631 days. That’s nearly 21 months, a new record. See the full story at: http://moneyland.time.com/2011/12/02/foreclosure-timeline-lengthens-to-record-21-months/#ixzz1fb6sgn5F.

November Consumer Bankruptcy Filings Drop 12 Percent from Last Year
U.S. consumer bankruptcy filings totaled 100,980 nationwide during November, a 12 percent decrease from the 114,587 total consumer filings recorded in November 2010

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DECEMBER 2, 2011

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

Creditors Could See Steep Losses in AMR Chapter 11 Case
As it restructures in chapter 11, AMR Corp. must find a way to deal with nearly $30 billion in debt, labor costs that far exceed those of its competitors, costly aircraft leases and billions of dollars in retirement liabilities. Analysts expect steep losses to many within AMR’s creditor constituencies.

U.S. Bank Funds Will Not Cover MF Global Shortfall, Trustee Says
The trustee overseeing MF Global Inc.’s bankruptcy said that it will have a shortfall in customer funds even if all the money in customer accounts at U.S. depository institutions is recovered.

AmFin Financial Emerges from Bankruptcy
Former bank holding company AmFin Financial Corp. has concluded its chapter 11 proceedings, although it will eventually wind down out of court.

And in General Economic News

Unemployment Rate Declines
The Labor Department said pFriday that the nation’s employers added 120,000 jobs last month. Also, the Department revised the October number upward, tripling it to 100,000 new jobs in October. The important political “take-away” point is that the unemployment rate fell to 8.6 percent, after having been mired around 9 percent for most of 2011. This jobless rate is the lowest recorded since March 2009. To be fair, the rate fell partly because about 315,000 workers dropped out of the labor force, and the jobless rate counts only people who are actively looking for work. Moreover, Bloomberg reports that average hourly earnings declined last month.

Massachusetts Sues Five Banks over Foreclosures
JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. were among five banks sued by Massachusetts for allegedly conducting unlawful foreclosures and deceiving homeowners.

Bank Credit Ratings Cut
Standard & Poor’s ratings service this week cut the ratings of the six largest U.S. bank holding companies by one notch. JP Morgan Chase went from A+ to A; Goldman Sachs, Bank of America, Morgan Stanley and Citigroup were downgraded from A to A-; and Wells Fargo was cut from AA- to A+. Among the eight largest banks, only Boston-based State Street escaped unscathed. The downgrades were part of more than 37 ratings of large global banks reviewed by the agency. S&P said that it had applied new standards to its methodology

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Joel Glucksman is an experienced civil and bankruptcy litigator specializing in the representation of secured lenders and other creditors in complex suits and bankruptcies. His court appearances take him throughout the State and Federal courts in the metropolitan area, focusing in particular on the Bankruptcy Courts for the District of New Jersey and the Southern and Eastern Districts of New York. For more information, please visit Joel Glucksman's full biography at Scarinci Hollenbeck

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