Insolvency Alerts February 2012

Insolvency Alerts February 2012

 

February 26th

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

Upcoming Municipality Bankruptcies

According to Bloomberg today, Stockton, California is allegedly cracking under continuing fiscal pressures. Stockton, a Central Valley agricultural center with a population of 292,000, this week may take the first steps toward becoming the most populous U.S. city to file for bankruptcy, and will consider defaulting on $2 million of debt payments, officials have said. California Governor Jerry Brown said yesterday he wasn’t prepared to discuss the situation. “I want to see what exactly there is,” Brown said in an interview at the National Governors Association meeting in Washington. “They’ve started a process, and that process will continue to proceed, and hopefully the city and the creditors will find some reasonable accommodation.”

While an improving U.S. economy is helping boost revenue for states, cities face declining aid and a drop in the property-tax take since the housing crash. Cities under fiscal stress are trying to avoid bankruptcy and bolster their finances, including Pontiac, Michigan, which abolished its police and Cleveland, which demolished thousands of condemned structures to preserve property values. Such actions aren’t always sufficient.

In General Economic News

More American households are falling back into the debt hole, this time without the safety net of home values to help bail them out, the New York Post reported Sunday. Last year, total U.S. consumer debt reached its highest point in a decade, according to a credit card industry observer.  In December 2011, the total consumer debt – which is the combination of nonrevolving and revolving debt – rose by some 9.3 percent to $2.498 trillion, according to the latest Federal Reserve Board numbers. Both revolving debt and nonrevolving debt increased. Revolving debt, which is credit card debt, went up by 4.1 percent. Nonrevolving debt, which includes loans for cars and education, rose 11.8 percent, the central bank’s report said.

Scott Grannis had a post on Friday about the recent acceleration in commercial bank lending to businesses, which grew at 15.2% annualized rate over the last quarter.  In another sign of improvement in credit conditions for small and medium-sized companies, the chart above shows the significant decreases over the last two years in the delinquency rates and charge-off rates for business loans at all U.S. commercial banks.  The delinquency rate for business loans fell for the eighth straight quarter in 2011 Q4 to 1.59%, the lowest rate since the first quarter of 2008, and the charge-off rate fell to 0.66%, the lowest rate since the first quarter of 2007. The credit market for bank lending to America’s small and medium-sized businesses is gradually recovering and slowly returning to the pre-recession conditions.

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February 24th

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

Stockton, Calif. Strives To Avoid Bankruptcy

Stockton, Calif., an agricultural center of about 292,000, is fighting to avert bankruptcy by shrinking its payroll, including a quarter of the police force, Bloomberg News reported yesterday. Twice since 2010 it has declared a state of fiscal emergency to force cuts on public employees. Stockton has the second-highest foreclosure rate in the U.S., behind Las Vegas, the eighth-highest unemployment rate at 15.9 percent in December and the eighth-highest violent crime rate in the country in 2010.

The City Council will be asked to vote next week to default on bonds and take the first steps toward bankruptcy, Bloomberg News reported today. City Manager Bob Deis intends to put an item on their agenda for a Feb. 28 meeting that would ask them to approve mediation with creditors as the first step required under a new state law before the city can seek bankruptcy. Deis also will ask the council to agree to stop making payments on municipal bonds beginning March 1, to suspend cash payouts to employees for unused vacation and sick leave, and to begin an investigation into the causes of the city’s fiscal crisis.

Jefferson County, Ala. Could Scuttle Bankruptcy Case

The bankruptcy judge presiding over the $4.23 billion chapter 9 proceeding of Jefferson County, Ala. wants guidance from the state’s highest court on a dispute that could scuttle the bankruptcy case, Reuters reported yesterday. Creditors claim the county is ineligible for chapter 9 bankruptcy under state law because Alabama law permits only governments with outstanding debt in the form of bonds to file for chapter 9, and Jefferson County has outstanding warrants, including sewer-system debt at the heart of the county’s financial crisis.

Open Range Communications to Wind Down Under Chapter 7

Open Range Communications Inc. will wind down under chapter 7 after failing to reorganize, the Deal Pipeline reported yesterday. The bankruptcy judge converted the telecommunications provider’s chapter 11 case to a chapter 7 liquidation yesterday.  Open Range decided to liquidate after failing to consummate a sale of its business. TotheHome.com LLC had offered $2 million to lead the bidding during a Nov. 14 auction, but withdrew its offer.

Cyberdefender Corp. Files Chapter 11

Consumer technical support company CyberDefender Corp. filed for chapter 11 protection yesterday with a pre-packaged plan, pinning its downfall on the economy and a botched audit months after it went public in June 2010, Dow Jones DBR Small Cap reported today. CyberDefender plans to auction its assets and have its senior lender, an affiliate of Guthy-Renker Partners Inc., kick off the auction with a $12 million bid, which includes $4.6 million in bankruptcy financing and loan forgiveness, plus $250,000 in cash.

In General Economic News

Housing Starts Up 1.5 Percent in January

The U.S. Commerce Department reports that January housing starts were up 1.5 percent, the result of a seasonally adjusted annual rate of nearly 700,000 units.  Housing starts have now increased for nine consecutive months — the second-best pace of overall housing production since October of 2008. This solid housing starts report suggests that builders are getting back to work, and adds to the growing field of evidence that the overall housing market is gradually but consistently moving in the right direction.

Student Loan Debt a “Ticking Time Bomb”

Financial analysts across the country are calling it a ticking time bomb.  College students have now amassed more than $1 trillion in debt from student loans.  That’s more than all of the outstanding credit card debt in the U.S.  According to the National Association of Consumer Bankruptcy Attorneys, college seniors who graduated with student loans in 2010 owed an average of $25,250.  That’s up five percent from the previous year.  Parents had an average of $34,000 in student loans for their children.  That figure is up 75% from 2005. Students and their parents are borrowing at record rates and it’s putting families in a deep hole.  The system is setting people up to become economically non-functional for the rest of their adult lives. With current law, it is nearly impossible to get rid of such debt through bankruptcy, and there is no statute of limitations on student loans.  That means lenders and creditors can keep after you all of your life.

Foreclosures Increase On Million-Dollar Properties
Five years after the burst of the housing bubble, America’s wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country — and many of them are doing so voluntarily, CNNMoney.com reported yesterday. Over 36,000 homes valued at $1 million or more were foreclosed on — or at least served with a notice of default — in 2011, according to data compiled by RealtyTrac. While that’s less than 2 percent of all foreclosures nationwide, it represents a much bigger share of foreclosure activity than in previous years. Out of all foreclosure activity, the share of foreclosures on properties valued at $1 million or more has risen by 115 percent since 2007 while the share of multi-million dollar foreclosures — or homes valued at more than $2 million — jumped by 273 percent. Meanwhile, the share of foreclosures on mid-range properties valued between $500,000 and $1 million fell by 21 percent.

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February 23rd

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

Dodgers Disclosure Statement Approved

The bankruptcy court approved the disclosure statement outlining the Los Angeles Dodgers’ proposed bankruptcy reorganization plan, the Associated Press reported yesterday. The only creditor allowed to vote on the plan is LA Partners LLC, the parent company of LA Holdco LLC. Holdco, in turn, is the sole member of the Los Angeles Dodgers Holding Co. The voting deadline is March 16, and a hearing to decide whether to confirm the plan is set for April 13.

Fuller Brush Files for Bankruptcy Less Than Two Months After “Reboot”

Fuller Brush Co., founded in 1906 and for decades known for its door-to-door salesmen, filed for bankruptcy less than two months after the company said that it had completely rebooted itself, Bloomberg News reported yesterday. The cleaning-products maker, based in Great Bend, Kansas, listed assets and debt of as much as $50 million each in chapter 11 documents filed yesterday.

LSP Energy LP (“LSP”) Files Chapter 11

On February 10th electricity operator LSP Energy LP (“LSP”) filed chapter 11 in the United States Bankruptcy Court for the District of Delaware.  As stated in court filings, LSP owns and operates an electricity plant located in Batesville, Mississippi.  Aside from its gas-fired electric generation facility, LSP’s assets consist primarily of 58 acres of land in which it operates its facility.

Real Mex Restaurants Sale Approved

The Bankruptcy Court has approved Real Mex Restaurants’ motion to sell substantially all of the Debtors’ assets to successful bidder RM Opco, which consists of certain of the Company’s noteholders that were in the Company’s pre-petition capital structure – including affiliates of Tennenbaum Capital Partners, Z Capital Partners and J.P. Morgan Investment Management.

In General Economic News

Small Business Bankruptcies Jump

The number of small businesses going bankrupt jumped by 48 per cent over the last 12 months, while small business start-ups fell by 95 per cent over the same period, according to Dun & Bradstreet’s analysis of business start-ups and failures for the December quarter 2011.  D&B found that across the economy business failures were down 10 per cent on the September quarter 2011, but up more than 40 per cent for the year. This coincides with Dun & Bradstreet’s downgrades during the December quarter of more than 128,000 firms that are likely to experience financial distress over the coming twelve months.

Distressed Properties Help Boost Home Sales

Sales of previously owned U.S. homes rose in January to the highest level since May 2010 as investors took advantage of lower prices to buy distressed properties, Bloomberg News reported Wednesday. Purchases climbed 4.3 percent to a 4.57 million annual rate, less than forecast, from a revised 4.38 million pace in December that was slower than previously estimated, a report from the National Association of Realtors showed yesterday.

Distressed properties made up the largest portion of all purchases since April. Almost one in four of all transactions was made by investors, which is helping to clear the market of unsold properties and may stabilize prices. Distressed sales, comprised of foreclosures and short sales in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 35 percent of the total in January, up from 32 percent a month earlier.  Investors accounted for 23 percent of purchases last month, while cash transactions were about 31 percent, about the same as a year ago.

 

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 February 21st

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

Grubb & Ellis Files for Chapter 11

U.S. commercial real estate services firm Grubb and Ellis Co. filed for chapter 11 protection and said that it has agreed to sell substantially all its assets to BGC Partners Inc., Reuters reported today. Grubb and Ellis said BGC Partners has agreed to provide debtor-in-possession financing and expects business to continue without disruption. California-based Grubb and Ellis listed estimated liabilities and assets in the range of $100 million to $500 million, according to a court filing.

WaMu Receives Court Approval to Exit Bankruptcy

Washington Mutual Inc. received long-sought court approval to exit bankruptcy and repay $7 billion to creditors, ending more than three years of court battles between hedge funds investors, shareholders and JPMorgan Chase & Co., Reuters reported yesterday. The reorganization plan will distribute the money to creditors, many of which are hedge fund investors who specialize in buying securities of bankrupt companies.

Kaufman Bros, Investment Bank, Files for Chapter 7 Liquidation

Kaufman Bros. LP, the minority-owned investment bank that helped unwind U.S. stakes in bailed-out financial companies, filed to liquidate in New York, Bloomberg News reported on Friday. The company listed both assets and debt of less than $10 million each in chapter 7 documents filed on Friday. Kaufman was founded in 1995 and billed itself as “the country’s largest minority-owned and operated investment banking and advisory firm” focused on technology, media, telecommunications, green technology and health care. The firm said in June that it helped advisory clients raise more than $50 billion since 1999. The company shuttered operations Jan. 30. Kaufman had assets of $3.26 million and partners’ capital of $1.21 million as of Dec. 31, 2010, according to documents filed with regulators.

Hellas Telecommunications Files for Chapter 15 
Hellas Telecommunications Luxembourg II SCA filed for chapter 15 protection to put on hold certain lawsuits pending against the company in New York State Supreme Court.

Jefferson County Bankruptcy Upends Muni-Bond Insurer
The bankruptcy case of Jefferson County, Ala., is threatening the survival of municipal-bond insurer Syncora Guarantee Inc., which says that it could be forced to pay millions of dollars to the county’s bondholders.

In General Economic News

Credit Card Debt Declines

Equifax reported today that nearly 60 of the top 100 metropolitan statistical areas hardest hit by credit card debt saw double-digit declines in the percentage of income owed to credit card companies. The cities with the most sizable reductions are clustered in four states: Florida, Louisiana, Washington and California. Trey Loughran, President of Equifax’s Personal Solutions business, said “This suggests that consumers from these hardest hit areas have been especially cautious in their spending and diligent in paying down their credit card debt.”

Small Business Failures Rise

Dun & Bradstreet has found that small business failures in the fourth quarter of 2011 rose 42% compared to the same period in 2010. The number of businesses calling it quits was down 10% compared to the third quarter of 2011, but up more than 40% for the year. “There is an increasing risk that the global economic slowdown will intensify the upward trend in insolvencies,” said Christine Christian, CEO of Dun & Bradstreet. “Despite recent rate cuts, there is a palpable lack of confidence in the current operating environment. This is obviously one of the side effects of long standing global uncertainty and can often be enough to deter businesses from entering the market, irrespective of actual conditions,” she added. According to the report, business failures were most common in the finance, service and construction industries.

Foreclosures Accelerate

Banks took back more U.S. homes in January, 2012 than in the previous month, the latest sign that foreclosures are accelerating after slowing sharply last year while lenders sorted out foreclosure-abuse claims. Foreclosures rose 8 percent nationally last month from December 2011, but were down 15 percent from a year earlier, foreclosure listing firm RealtyTrac Inc. said Thursday.

And Now for Something Completely Different:

Some Random Insolvency Thoughts

The Greek Crisis

The Greek debt crisis has ground on for months now, commanding the attention of analysts and financial duffers alike.  [See my Tweets on this subject at @JGlucksman.]  Over the last day or so, the EC, their banks, the Greek bondholders, and the Greeks reached a workable deal on providing another large bailout to Greece — $172 billion.  In exchange, bondholders will accept what appears to be a 75% haircut on outstanding Greek bonds, and the Greeks will slash spending, prices, wages, and apparently everything else in sight, in an attempt to reduce their debt load to a reasonable percentage [120.5%] of Greek GDP.  See the NYTimes article on this at http://www.nytimes.com/2012/02/22/world/europe/euro-zone-leaders-agree-on-new-greek-bailout.html?hpw.

The question for the table, however, is whether this process is simply chasing a receding target.  The more that the Greek government slashes, the lower GDP becomes.  Is it every possible to cut one’s way to prosperity?  I’d be curious to hear your reactions.

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February 14th

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

LSP Energy Limited Partnership Files Chapter 11

LSP Energy Limited Partnership and three affiliated Debtors filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware. The Company operates an electric generation facility  and explains that it filed for bankruptcy “to complete an orderly sale of its assets or the ownership interests in LSP for the benefit of all stakeholders.  LSP

CDEX Chapter 11 Petition Filed

CDEX filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Arizona. It is a technology development company, focused on applying its patented and patents pending chemical detection technologies to develop products in various markets including the healthcare, security and brand protection markets.

Hostess’ Teamsters Members Raise Threat of Strike

The Teamsters Union said that nearly 7,500 union workers at Hostess Brands Inc., the makers of Twinkies and Wonder Bread, may strike if a bankruptcy judge grants the company’s bid to slash commitments to union employees, Reuters reported. The Teamsters said in a statement that its members voted by a margin of 9-to-1 to authorize the strike if Hostess’ “unfair” proposal is granted. Hostess submitted the request on Jan. 25, two weeks after filing its second bankruptcy since 2004. The company said that a successful reorganization will require it to withdraw from multiemployer pension plans, bring down its cost of long-term worker benefits, and alter the terms of its collective bargaining agreements.

TSC Global Puts Subsidiaries Into Chapter 11 Bankruptcy

Charlotte, N.C.-based TSC Global LLC placed several subsidiaries under bankruptcy protection on Sunday as the company shifts its focus to selling an emerging product: the smokeless, battery-operated cigarette, Dow Jones DBR Small Cap reported. Company executives said that TSC will continue supplying merchandise but that the restructuring will help the company focus on its promising Mistic eCigs, which release a nicotine-laced water vapor which the company says can be inhaled indoors and other places where smoking is banned.

ManagedStorage Trustee Files Preference Cases

The Chapter 7 Trustee in the ManagedStorage bankruptcy proceeding has commenced preferential payment lititgation against various defendants.  At the time the company filed for bankruptcy, it was based in Denver, Colorado and operated offices in Illinois, Washington, California, New Jersey, Pennsylvania, New York, Oregon, Texas, Colorado and the United Kingdom.

In General Economic News

Foreclosures Drop 24 Percent in 2011

Foreclosure activity dipped nationwide in 2011 as completed foreclosures fell 24 percent to 830,000 from 1.1 million a year earlier, according to a report from CoreLogic. December foreclosures also declined year-over-year to 55,000 from 67,000. The number of mortgages 90 days or more delinquent also fell to 7.3 percent from 7.8 percent a year earlier, but rose from 7.2 percent in November. Foreclosure inventory saw a similar decline by 8.4 percent from December 2010. Houses in the foreclosure process totaled 1.4 million in December 2011, making up 3.4 percent of all homes with outstanding loans.

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February 10th 

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

US Objects to A&P Plan

The federal government has objected to The Great Atlantic & Pacific Tea Company Inc.’s reorganization plan, arguing that it would give the corporation an overly broad discharge and grant releases that may interfere with the government’s ability to enforce environmental and criminal laws.

The Connaught Group, Ltd. Files For Chapter 11

The Connaught Group, Ltd. has filed a Chapter 11 bankruptcy in the Southern District of New York.  It lists assets of $10,000,000 to $100,000,000 and is in the retail/manufacturing category.

Casino Player Publishing, LLC Files For Chapter 11

Casino Player Publishing, LLC has filed a Chapter 11 bankruptcy in the New Jersey Bankruptcy Court.  It lists assets of less than $10,000,000 and is in the Entertainment/Recreation, Media industry.

TBS International Wins Approval to Tap $42.8 Million Bankruptcy Loan

Global shipping company TBS International PLC got court permission to start spending a $42.8 million bankruptcy loan that will keep its 41-ship fleet sailing and refresh the company’s finances, which have been worn down by weak overseas trade and growing fuel costs.

In General Economic News

New Unemployment Claims Drop Unexpectedly

The number of Americans signing up for unemployment benefits unexpectedly fell last week, the latest sign of recovery in the labor market. Initial claims for state jobless benefits dropped 15,000 to 358,000, the Labor Department said on Thursday. A four-week average of new filings, which provides a better view of the trend, hit its lowest level since April 2008. The decline in first-time claims, which defied economists’ forecasts for a rise to 370,000, pointed to building strength in the labor market and raised the odds of another solid increase in employment this month. “We are getting better employment growth and are seeing some signs that we are getting some self-sustaining aspects of economic activity,” said Michael Strauss, chief economist at Commonfund in Wilton, Connecticut.

Traded Deficit Widens

U.S. trade deficit widened by 3.7% in December to $48.8 billion, the highest level in six months, the Commerce Department said Friday. The trade deficit was slightly above the consensus forecast of Wall Street economists of a deficit of $48.5 billion. Imports rose faster than exports in December. The U.S. trade deficit with China widened to $23.1 billion in compared with $20.7 billion in the same month last year. The government also revised the deficit in November to $47.1 billion from $47.8 billion. For the full year, the trade gap widened 11.6% to $558 billion from $500.0 billion in 2010. Exports of goods and services grew 14.5% to a record $2.1 trillion while imports advanced 13.8% to a record $2.7 trillion.

 

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February 9th

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

Real Mex Restaurants Approves Bankruptcy Sale to Senior Lenders

Real Mex Restaurants, a Cypress, Calif.-based operator of the bankrupt Chevy’s Fresh Mex, El Torito and Acapulco Mexican restaurant chains, approved a bid to sell all of its assets and subsidiaries to a group of its senior lenders.

Barneys Hires Restructuring Advisers

Barneys New York Inc., the swanky retailer known as a magnet for fashionistas, is headed for talks with lenders to get a handle on a debt load that stems from its 2007 takeover by Dubai investors, the Wall Street Journal reported today. In the past couple of weeks, Barneys has tapped bankruptcy and restructuring lawyers at Kirkland & Ellis as the chain aims to rework its finances and keep a nascent turnaround on track. Barneys needs to refinance a $200 million credit line that comes due in September. To do so, Barneys may need to reduce other debt mostly held by hedge-fund manager Richard Perry and supermarket magnate Ron Burkle. The debt load is mostly the result of a private-equity takeover of the company five years ago that burdened it with an additional $500 million in debt.

Actor Gary Busey Files for Bankruptcy

Court records show actor Gary Busey has filed for chapter 7 bankruptcy and is listing more than $500,000 in estimated personal debts, the Associated Press reported yesterday. Busey’s filing on Tuesday in Los Angeles provides few details but includes more than a dozen potential creditors. The filing states the Busey has less than $50,000 in assets.

In General Economic News

Credit Card Chargeoffs Drop

Fitch’s Prime Credit Card Chargeoff Index for January dropped 31 basis points (bps) to 5.33%, a level not seen since the end of 2007. Chargeoff performance remained approximately 36% lower compared to January 2010. Prime chargeoffs have diminished by more than half from an all-time high of 11.37% set in February 2010. Along with chargeoffs, delinquencies and excess spread also improved.

Foreclosure Crisis Seen to be Abating

Slowly, but surely, the foreclosure crisis seems to be abating. The number of homes in foreclosure shrunk by 130,000, or 8.4%, in 2011, according to a report from CoreLogic, an economic research firm. These are homes owned by borrowers who had slipped far behind on payments, forcing lenders to put them into the foreclosure process. The homes remain foreclosure inventory until they’re sold — either at auction or in a short sale, which is when a home is sold for less than the mortgage value — or until homeowners are current again on payments. There are dual reasons for the inventory drop, according to Mark Fleming, chief economist with CoreLogic. “The pace at which properties are entering foreclosure is slowing,” he said. “And servicers nationwide stepped up the rate at which they were able to process distressed assets.” In recent years, homes have entered foreclosure more slowly because lenders are carefully scrutinizing applicants; only very low-risk borrowers get loans. That, plus a gradual improvement in the economy, means fewer borrowers are getting into trouble.

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February 7th

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

TBS International Files for Pre-Packaged Bankruptcy

TBS International, which provides shipping services, filed a pre-packaged chapter 11 as part of a debt restructuring agreement with its lenders, Reuters reported yesterday. The plan was approved by all of its voting lenders. TBS International said the proposed plan is to restructure the company’s secured debt and pay in full allowed claims of unsecured creditors. The company also said ownership of its operating units will be transferred to a newly formed entity that will be owned mostly by its lenders, while old equity holders will receive no distributions.

Open Range Communications to Liquidate

Open Range Communications has asked a Delaware court to switch its Chapter 11 reorganization case to a Chapter 7 bankruptcy, saying it has no realistic chance to rehabilitate the business. The defunct wireless broadband company filed for the change Monday, less than three weeks after it auctioned substantially all of the company’s assets to raise money.

In General Economic News

Banks Paying Homeowners to Engage in Short Sales
Accelerating efforts to move troubled mortgages off their books, banks are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe, Bloomberg News reported today. Lenders have previously delayed or blocked short sales, but banks have now decided that the deals are faster and less costly than foreclosures. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York. Losses for lenders are about 15 percent lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate, according to Moody’s. The deals accounted for 33 percent of financially distressed transactions in November, up from 24 percent a year earlier, said CoreLogic Inc., a Santa Ana, Calif.-based real estate information company.

And Now for Something Completely Different:

Some Random Insolvency Thoughts

Greek Debt Crisis

The continuing soap opera of the Greek debt negotiations is maddening.  I don’t know about you, but I am rather tired of the on-again, off-again negotiations, as well as the recriminations and back-biting among all of the parties involved.  I just want them all to act like adults and solve the problem.

 

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February 6th

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

United Retail Group Files for Bankruptcy

Bloomberg reported last week that United Retail Group Inc., owner of the Avenue plus-size women’s clothing stores, filed for bankruptcy court protection citing leasing costs and announced plans to sell the company.  “We are seeking relief from disproportionately high costs for many of our leases that were signed prior to the recession,” United Chief Executive Officer Dawn Robertson said in the statement. The company, based in Rochelle Park, New Jersey, listed assets of $117.2 million and debt of $67.3 million in Chapter 11 documents filed in U.S. Bankruptcy Court in Manhattan.

Jefferies Group Inc. and Cantor Fitzgerald Have Outlooks Lowered

Jefferies Group Inc. and Cantor Fitzgerald LP had their outlooks lowered to “negative” by Standard & Poor’s on the prospect that concern about Europe’s debt crisis will weigh on trading and investment banking.

Judge Rejects Motion to Convert MF Global Case to Chapter 7

Bankruptcy Judge Martin Glenn rejected requests by some former customers of MF Global Holdings Ltd. to convert the case to a chapter 7 liquidation or conduct their own probe into the futures and commodities brokerage’s sudden collapse.

General Maritime Files Reorganization Plan

General Maritime, which filed for chapter 11 protection in November, said that private equity firm Oaktree Capital Management will provide it with $175 million in new capital under its reorganization plan.

BNY Mellon Sues Alabama’s Bankrupt Jefferson County Over Sewer Revenue

Bank of New York Mellon Corp., as trustee for $3.6 billion of sewer warrants, sued bankrupt Jefferson County, Alabama, claiming it’s entitled to all of the county’s system revenue, Bloomberg News reported Saturday. The bank seeks a judgment that it is entitled to the system revenue, capital expenditures, the payment of sewer warrants and revenue for non-operating expenses, according to the filing submitted on Friday in bankruptcy court.

AMR’s Horton Expects American Airlines to Leave Bankruptcy Without Merger

AMR Corp.’s  Chief Executive Officer Tom Horton said that American Airlines plans to exit bankruptcy as a stand-alone carrier and would consider making acquisitions afterward, Bloomberg News reported on Saturday. American wants to negotiate new union labor agreements as part of a plan unveiled last week to cut 13,000 jobs and cut annual operating costs by $2 billion, Horton said.

Global Aviation Files for Chapter 11

Global Aviation Holdings Inc , the largest commercial provider of charter air transportation for the U.S. military, filed for chapter 11 protection to achieve “industry competitiveness” by cutting costs and debt load, Reuters reported yesterday. During the restructuring, the company said that it will continue to operate as normal, without interruption. It also filed motions on Sunday with the court seeking interim relief that will ensure its ability

Mayor Says Providence Could Face Bankruptcy

Providence, R.I., Mayor Angel Taveras painted a bleak picture yesterday of the city’s finances, saying that Providence faces “devastation” and could go bankrupt if retiree benefits are not cut and tax-exempt institutions like Brown University do not pay more in lieu of taxes.

Christ Hospital of Jersey City Files for Ch. 11 Bankruptcy

Christ Hospital of Jersey City filed for Ch. 11 bankruptcy today, after Ontario, Calif.-based Prime Healthcare yesterday withdrew its offer for the struggling facility.  Christ Hospital reportedly loses $800,000 a month.

 

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February 1st

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

PBGC Pressures American Airlines

The PGBC signaled yesterday it would fight to prevent American Airlines from using bankruptcy to shed its pension plans, the New York Times reported today.  Also, the American Airlines parent AMR Corp. reported a $904 million net loss for December in the first monthly operating report during its chapter 11 bankruptcy, Bloomberg News reported yesterday.

[Editor’s Comment: The dance between the debtor and the U.S. should be an interesting minuet to watch.]

U.S. District Court Approves W.R. Grace’s Reorganization Plan

W.R. Grace & Co’s reorganization plan was just approved by the Delaware district court.  Grace filed chapter 11 in April 2001, weighed down by asbestos claims. The reorganization plan calls for setting up two asbestos trusts to compensate personal injury claimants and property owners. Funds will come from a variety of sources including cash, warrants to purchase common stock, insurance proceeds, among others and will cover all current and future asbestos claims, the company said.

California Controller: State to Run Out of Cash in March Without Action

California will run out of cash by early March if it does not take swift action to find $3.3 billion through payment delays and borrowing, according to a letter state Controller John Chiang sent to state lawmakers yesterday, the Sacramento Bee reported today. Chiang said that additional cash management solutions are needed because state tax revenues are $2.6 billion less than what Gov. Jerry Brown and state lawmakers assumed in their budget last year. Meanwhile, Chiang said that the state is spending $2.6 billion more than state leaders planned on.

[Editor’s Comment: The Bankruptcy Code is not available to states of the United States.  Chapter 9 is limited to subdivisions of states, and the Bankruptcy Code is otherwise limited to “persons”, which are defined to exclude governmental units.]

  In General Economic News

Foreclosures Draw Private Equity as U.S. Rents Homes

Private equity firms are jumping into distressed housing.  The U.S. plans to market 200,000 foreclosed homes as rentals to speed up economic recovery, Bloomberg News reported yesterday. GTIS Partners will spend $1 billion by 2016 acquiring single-family homes to manage as rentals, Thomas Shapiro, the fund’s founder, said. That followed announcements this month that GI Partners, a Menlo Park private equity fund, expects to invest $1 billion, and Los Angeles-based Oaktree Capital Management LP will spend $450 million on similar housing.

GTIS Partners founder Thomas Shapiro said “It’s a massive market.” “We’re starting to see this as a billion dollar opportunity to buy rental housing.”  [Editor’s Comment: If entrepreneurial capitalists, as Mr. Shapiro indicates, see this as a great opportunity, then is at least a partial solution to the backlog of unsold homes at hand?]

Creating more single-family rentals is one of a series of programs introduced by President Obama, aimed at reviving housing.  Last week, the administration revised its Home Affordable Modification Program, offering government incentives for mortgage investors Fannie Mae and Freddie Mac when they forgive debt on homes that lost value as a way of preventing delinquent borrowers from losing their houses.

Home Prices Declined In 19 Of 20 Cities In November

Standard & Poor’s/Case-Shiller home-price index released yesterday showed that prices dropped in November from October in 19 of 20 cities tracked; moreover, 12 percent of homeowners with a mortgage are either delinquent or in foreclosure, the Associated Press reported yesterday. Prices have fallen 33 percent nationwide since the housing bust — to 2003 levels.

 And Now for Something Completely Different:

Some Random Insolvency Thoughts

Euro Crisis Has Hurt U.S. Loans

Banks in the U.S. kept credit fairly tight in the final months of 2011 even as demand for loans rose, illustrating how Europe’s sovereign-debt crisis is threatening the fragile U.S. recovery, the Wall Street Journal reported this week. The Federal Reserve’s quarterly survey of American banks and foreign ones with U.S. operations showed that credit standards on commercial and industrial loans were little changed despite banks reporting an increase in loan demand, especially from small companies. As also seen in the survey for the third quarter, Europe’s financial turmoil led U.S. banks to tighten credit to Europe. However, there was a silver lining to the report as nearly half the surveyed institutions that compete with European banks noted an increase in business as a result of less competition from European institutions.

“’Tis an ill wind that doesn’t blow someone some good.”

 

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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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