Insolvency Alerts July 2012

Insolvency Alerts July 2012

July 30th

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

 Digital Post Files Chapter 7
Digital Post Interactive has filed a bankruptcy petition under Chapter 7 with the Bankruptcy Court for the Central District of California. The company provides digital media applications.  It had a previous bankruptcy in March 2011, which was dismissed a year later.

Neogenix Oncology Files Chapter 11
Neogenix Oncology has filed a Chapter 11 bankruptcy in Maryland.  The company is a clinical stage biotherapeutic company marketing therapeutic and companion diagnostic products for detection and treatment of cancer.  It announced its entry into an asset purchase agreement with Precision Biologics for the sale of substantially all of its assets.

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In General Economic News

Property Loan Delinquencies Fall
The delinquent rate on securitized commercial-property loans fell for the first time in 2012 after reaching record highs amid a wave of maturing debt from the boom years. Mortgage payments more than 60 days late decreased 11 basis points to 9.34 percent in July.  This was the first monthly decline since January, according to Wells Fargo & Co. That being said, loans totaling $3.5 billion fell behind for the first time this month, the analysts led by Marielle Jan de Beur said in a report yesterday. Underwater borrowers — who owe more than their properties are worth — are struggling to pay off debt taken out during the real estate bubble with buildings’ values plummeting as much as 37 percent from 2007 peaks. About half of commercial mortgages packaged as securities maturing this month were able to pay off on time as boom-era loans failed to refinance, according to Barclays Plc.

 

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July 27th

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

Near-Bankrupt San Bernardino Votes to Default on Debt
San Bernardino, the third California city planning to file for bankruptcy since June, voted yesterday to suspend debt payments, freeze vacant jobs and quit paying into a retiree health fund under a three-month emergency plan approved by the city council.

Compton Not Filing for Bankruptcy, According to City Manager
Compton California’s new city manager sought to assure the public yesterday that the financially troubled city is not planning to file for bankruptcy, but it may hire L.A. County to do a forensic audit to put allegations of fraud to rest.

Judge Shifts RoomStore Bankruptcy to Chapter 7 Liquidation 
Bankruptcy Judge Douglas Tice has agreed to convert the chapter 11 case of RoomStore Inc. to a chapter 7 liquidation, effectively ending the retailer’s efforts to remain in business.

Laser Developer Deep Photonics Files for Chapter 11 Bankruptcy 
Laser developer and manufacturer Deep Photonics Corp . filed for chapter 11 on Friday amid a dispute with its former chief executive, who the company says violated his contract and unlawfully used trade secrets.

Madoff Customers to be Paid $1.5 Billion to $2.4 Billion
Customers of Bernard Madoff, who have received just $333 million from the liquidator of the con man’s estate, will get a second payment of $1.5 billion to $2.4 billion, an amount some investors found disappointing.  Madoff trustee Irving Picard said he will ask a judge to approve the distribution, which would bring payments to as much as 50 percent of allowed claims. Part of $5 billion received in a settlement with the Jeffry Picower estate would be used for the payment, although “a large portion” would be held in reserve, he said in a statement today.

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In General Economic News

Foreclosure Filings Increase in 60 Percent of Large U.S. Cities
Foreclosure filings rose in almost 60 percent of large U.S. cities in the first half of 2012, indicating many areas will have more distressed homes on the market later this year, RealtyTrac Inc. reported. More than 1 million homes in metropolitan areas with populations of at least 200,000 received notices of default, auction or repossession, up 1.5 percent from the last six months of 2011, the Irvine, California-based data provider said today in a statement. Among the 20 largest markets, Tampa, Florida; Philadelphia; Chicago and New York City had the biggest percentage increases in filings. The gain in foreclosure actions followed a probe into abusive lender practices that delayed bank seizures nationwide. More repossessions will buoy deals “in many local markets where a shortage of aggressively priced inventory has been holding up sales,” RealtyTrac Chief Executive Officer Brandon Moore said in the statement.

Consumer Debt Decreases 14.6 Percent in First Half of 2012
Overall consumer debt fell 14.6 percent to an average of $12,986 in the first half of 2012, according to a report released today by Bills.com. The report found that credit card debt remains the most common type of consumer debt at 53 percent. Nationally, average credit card debt grew 2 percent to $5,600 in the first half of 2012, but peaked in the holiday debt period of January and February at $7,600. The number of both student loans and home loans fell slightly, as did average loan balances. The average home loan balance dropped significantly, falling 11 percent to $149,200, according to the report. The number and size of collections accounts continues to grow with 11 percent of consumers in collections and an 18 percent increase in average collection balances.

Personal Bankruptcy Filings Likely to Decline
Fitch believes personal bankruptcy filings are likely to decline by 11% for the current year. The expectation follows data indicating that filings in first half of this year were running well below initial expectations. According to The National Bankruptcy Research Center (NBKRC), U.S. personal bankruptcy filings decreased by 13% in the first half of this year.

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And Now for Something Completely Different:

Some Random Insolvency Thoughts

Democrats Propose Bill To Protect Wages, Benefits In Bankruptcy
Congressional Democrats are proposing legislation that could double employees’ and retirees’ recoveries when their employers file for chapter 11 protection, Dow Jones Daily Bankruptcy Review reported. Led by Sen. Dick Durbin (D-Ill.) and Rep. John Conyers (R-Mich.), the “Protecting Employees and Retirees in Business Bankruptcies Act” introduced on July 12 would amend the Bankruptcy Code to double, to $20,000, the maximum claim for wages and benefits that workers and retirees can assert in their employers’ chapter 11 cases. Rep. Conyers and Sen. Durbin have introduced similar legislation twice already, in 2007 and 2010, but neither version made it before the full House or Senate.

 

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July 26th

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

 Santa Ysabel Resort and Casino Files Chapter 11
Pursuant to a June 27, 2012 tribal resolution, the Santa Ysabel Resort and Casino has filed a voluntary Chapter 11 bankruptcy petition. The casino is an unincorporated enterprise for economic development owned by the Iipay Native American Nation of Santa Ysabel, a federally recognized tribe. After numerous construction problems during the peak of construction pricing, the casino opened in 2007, just before the drop in the economy. According to papers filed in the Bankruptcy Court, the casino is financially distressed and unable to service the debt associated with its construction and operation.

This filing may become a case of first impression as to a tribe’s eligibility for relief to file under the Bankruptcy Code. Because of the uncertainty as to whether an Indian tribe can be a “debtor” under the Code, other tribes facing financial distress have elected not to file bankruptcy, but rather, to continue workouts outside of bankruptcy court. An eligibility decision in this case involving the Santa Ysabel Resort and Casino could have major ramifications for both tribes and lenders to tribes.

FiberTower Chapter 11 Petition Filed
FiberTower and certain of its wholly-owned subsidiaries – FiberTower Network Services, FiberTower Licensing and FiberTower Spectrum Holdings – has filed for Chapter 11 protection with the U.S. Bankruptcy Court in Texas. The company provides telecommunications services. It announced that it will also be filing a plan of reorganization that will eliminate its long-term debt and reorganize FiberTower around its restructured legacy backhaul network as well as two other business lines: spectrum services and carrier services. The proposed plan of reorganization is supported by an ad hoc group of holders of the Company’s secured debt pursuant to a plan support agreement.

Dewey Leboeuf’s Bonus Plan Draws Objections
Bankrupt law firm Dewey & LeBoeuf’s plan to pay bonuses to its remaining employees has drawn objections from U.S. Trustee, who said that the plan might not be cost effective, Reuters reported. Davis said in court papers that the proposed plan did not provide enough information to determine if the cost of retaining employees was economically feasible. The law firm is seeking approval from the U.S. Bankruptcy Court in Manhattan to pay $450,000 to its 52 remaining employees who collect money and bill former clients. The trustee also said the plan could not be justified because the firm is no longer operating as a normal business.

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In General Economic News

Student Debt Rising Sharply
Student debt is rising sharply among all age groups, but middle-aged Americans appear to be struggling the most with payments, according to new data released by the Federal Reserve Bank of New York. The delinquency rate – or the percentage of debt on which no payment has been made for 90 days – was 11.9% for debt held by borrowers aged 40 to 49 as of March. That compares with a rate of 8.7% for borrowers of all ages. The New York Fed, which based its data on a sampling of consumer credit reports, said delinquency rates for all groups are much higher if one excludes loans in deferment for reasons such as a borrower still being in school. High delinquency rates on student debt are causing concerns among economists because delinquencies damage a person’s credit, making it harder for consumers to borrow in the future, while causing the total debt to grow as interest and penalties accrue. Two-thirds of the nation’s $900 billion in student debt is held by Americans under 40, the Fed estimates. But borrowers over 40 are having a particularly tough time with student debt for several reasons, consumer and higher-education experts say.

National Housing Crisis Takes Toll On Older Americans
More than 1.5 million older Americans already have lost their homes, with millions more at risk as the national housing crisis takes its toll on those who are among the worst positioned to weather the storm, a new AARP report says. Older African Americans and Hispanics are the hardest hit. “The Great Recession has been brutal for many older Americans,” said Debra Whitman, AARP’s policy chief. “This shows that home ownership doesn’t guarantee financial security later in life.” Even working two jobs hasn’t been enough to allow Jewel Lewis-Hall, 57, to make her monthly mortgage payments on time. Her husband has made little money since being laid off from his job at a farmer’s market, and Lewis-Hall said her salary as a school cook falls short of what she needs to make the payments on her home in Washington. Lewis-Hall and her husband have been making their payments late for about a year, but panic didn’t set in until recently, when the word “foreclosure” showed up in a letter from the bank. “You’re used to living a certain way, but one thing leads to another,” Lewis-Hall said. “It’s not like I have a new car or anything. I’m driving one from 1991.”

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July 19th

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

Compton, California Facing Bankruptcy
Compton, Calif., a city of 93,000 people located on the outskirts of Los Angeles, must decide by September 1 whether to seek bankruptcy, according to its two most senior financial officials, Reuters reported yesterday. Compton, which has an accumulated $43 million deficit and has depleted what had been a $22 million reserve, will run out of cash to make its payroll on September 1 at its current cash consumption rate, city comptroller Steven Ajobiewe told the city council during a July 17 meeting.

San Bernardino Faces Bankruptcy
San Bernardino, whose government is under criminal investigation, will become the latest California municipality to seek court protection from creditors after the City Council voted for an emergency bankruptcy yesterday, Bloomberg News reported today. San Bernardino would join California’s Stockton, an agricultural center of 292,000 east of San Francisco, and Mammoth Lakes, a mountain resort town of 8,200 south of Yosemite National Park, by entering chapter 9 proceedings.

Madoff Trustee Pursues Sons’ Houses
Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities Inc., is laying claim to four homes owned by Bernard Madoff’s two sons and their spouses as he seeks to recoup money lost in the Ponzi scheme, Bloomberg News reported yesterday. Picard filed lis pendens notices last week on two homes in Greenwich, Connecticut, and two luxury condominiums in Manhattan purchased by Mark and Andrew Madoff and their wives, according to public records.

Brown Rudnick Faces Loss of Bankruptcy Fee
The state pension fund of the Northern Marianas – which made a 44-day attempt at chapter 11 — ran up a $750,937.82 legal bill before a bankruptcy judge ruled that it did not qualify for protection under the Bankruptcy Code, the Wall Street Journal reported today. Government leaders of the territory, who opposed the pension fund’s request for bankruptcy, are now protesting the legal bill from Brown Rudnick, whose Boston-based attorneys put the fund into bankruptcy on April 17. The government wants an 85 percent discount from Brown Rudnick, a figure it arrived at based on the 15 percent chance that the fund would actually be eligible for protection.

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In General Economic News

Loan Defaults Decrease
S&P Dow Jones Indices and the S&P/Experian Consumer Credit Default Indices, comprehensive measures of changes in consumer credit defaults, showed that most loan types have seen a decrease in default rates, and many for the 6th consecutive month. Four loan types posted their lowest rates since the end of the 2007/2009 recession. The auto loan default rate increased marginally in June, but May’s rate was the lowest in its 8+ year history. The national composite declined to 1.52% in June from its 1.62% May rate. The first mortgage default rate decreased from May’s 1.50% to June’s 1.41%. The second mortgage default rate declined from 0.88% in May to 0.73% in June. Bank card default rate dropped to 3.97% in June from May’s 4.35%. Auto loans default rate rose marginally to 1.04% in June from its May rate of 1.03%. “June 2012 data continued a positive trend in consumer credit quality,” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices. “Consumer default rates are falling and we are approaching new lows across most loan types. In the last recession most default rates peaked in the spring of 2009; since then the decline has been bumpy but consistent.

 

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July 18th

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

FiberTower Corporation Files For Chapter 11

The San Francisco-based telecommunications provider listed $331.2 million in assets on its petition.

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In General Economic News

A Further Drag on the Economy
The Comptroller of the Currency’s Spring 2012 “Semiannual Risk Perspective” notes that almost 60 percent of home equity line balances will start requiring payments of principal and interest after 2014.  While $11 billion in home equity lines are starting to require principal and interest payments this year, the amount jumps to $29 billion by 2014, the office said. That is followed by a surge to $53 billion in 2015 and $73 billion in 2017. For 2018 and beyond, it is $111 billion. The properties backing many of these loans are no longer worth the amounts borrowed on them.

It’s Not the Left Coast; It’s Nebraska & Dixie
Nebraska is home to almost one-fifth of the more than 220 chapter 9 bankruptcies filed in the U.S. since 1981, according to a nationwide review of federal court records, Bloomberg News reported yesterday. California, with more than 20 times Nebraska’s population, is second, followed by Texas and Alabama. The main difference between Nebraska and other states is the kind of governmental bodies that file for bankruptcy: No town, city or county has sought court protection in the state. All 45 of Nebraska’s chapter 9 cases were by special tax districts, most of them owned by residential subdivision developers who used property-tax revenue to pay for streets, sewers and other infrastructure.

Credit Card Delinquencies Fall
Alliance Data Systems Corp. reported delinquencies and charge-offs fell in June from a year prior for the private-label cards it oversees. The company operates loyalty-program and private-label credit cards, as it manages accounts for retailers like Victoria’s Secret, Ann Taylor and Pottery Barn. Charge-offs fell to 4.7% in June, from 6.9% in June 2011. For the quarter ended in June, charge-offs were 4.9%, compared with 7.2% last year. The percentage of accounts over 30 days delinquent was 3.9% for the period ended June 30, flat with last month but down from 4.5% in 2011. Alliance Data has seen its earnings improve as credit quality and credit-card sales have increased. The company in April reported a 33% increase in first-quarter earnings, as it watched revenue grow at double-digit rates across its business. The company had to set aside less money to cover bad loans and its Epsilon marketing-services business climbed 46%.

Auto Loans Easier to Get
Getting a loan for anything these days can be tough. Only Americans with virtually spotless credit records can obtain mortgages. Consumer credit card availability remains crimped. Small businesses, too, are finding it hard to secure financing to expand their operations. But there’s one exception in this credit-constrained economy: auto loans. Consumers looking to buy a new set of wheels have found it increasingly easy-and cheap-to borrow money in recent months, with new auto bank loans surging to a seven-year high between January and March this year, according to Equifax. The money is even flowing for borrowers with a few dings on their records. According to a recent survey of bank risk professionals by financial analytics firm FICO, lenders expect an increase in car loan availability for consumers with damaged credit, often referred to as “subprime borrowers.”

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July 17th


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

 

Daffy’s to Liquidate Its Stores
Daffy’s, a New York-area off-price chain featuring discounted designer clothing and other name-brand products, said that it was liquidating its 19 stores over the next several months, amid increased competition from bigger rivals, led by T.J. Maxx parent TJX Cos.

BTA Bank Chapter 15 Petition Filed
The Republic of Kazakhstan-based BTA Bank (aka JSC BTA Bank) filed for Chapter 15 protection with the U.S. Bankruptcy Court in the Southern District of New York. The Company operates as a commercial bank, accepting deposits and making loans. According to documents filed with the Court, BTA Bank initiated a voluntary judicial restructuring proceeding in the Specialized Financial Court of Almaty City in Kazakhstan in May 2012. BTA Bank indicated total assets of more than $1 billion.

In General Economic News

Retail Purchases Decrease Slightly in June
Retail sales in the U.S. unexpectedly fell for a third month in June as limited employment gains took a toll on consumers.

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July 16th


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


Lumbermens Mutual Casualty Company Seeks Rehabilitation

Lumbermens Mutual Casualty Company and American Manufacturers Mutual Insurance Company (part of Lumbermens and formerly known as Kemper) recently entered state court rehabilitation proceedings after years of struggling financially under the supervision of the Illinois Department of Insurance.

Valence Technology Chapter 11 Petition Filed

Valence Technology filed for Chapter 11 protection with Bankruptcy Court in Texas. The company manufactures energy systems. According to the company, “The business reorganization is intended to bolster the Company’s liquidity in the U.S. and abroad and enable the Company to focus on its core lithium phosphate markets.” Valence Technology is still negotiating debtor-in-possession financing. Subsidiaries outside of the U.S. are not subject to the bankruptcy proceedings and are expected to continue to operate in the ordinary course of business.

Ocala Funding Chapter 11 Petition Filed

Privately-held Ocala Funding filed for Chapter 11 protection with the Bankruptcy Court in Florida. The company is the mortgage-securities unit of defunct lender Taylor, Bean & Whitaker Mortgage – which filed Chapter 11 in August 2009. Ocala’s chief restructuring officer tells the Court, “The debtor has liabilities that exceed its assets by more than $2 billion. Nearly half this shortfall is the result of transfers of the debtor’s assets to Freddie Mac under the direction and control of the Farkas Parties.” Ocala Funding indicated total assets of more than $1 billion on its Chapter 11 petition.

Ex-Mets Player Lenny Dykstra Pleads Guilty to Bankruptcy Fraud
Former New York Mets outfielder Lenny Dykstra pleaded guilty to looting valuables from his $18 million mansion and secretly selling them after his bankruptcy filing in 2009.

In General Economic News

The tide of earnings reports due out this week may shed light on the impact of Europe’s struggling economy on U.S. corporate profitability. Retail and housing data also will be watched. Key dates and data releases: retail sales, Empire State manufacturing survey (7/16); consumer inflation, industrial production (7/17); housing starts, Fed “beige book” report (7/18); home resales, Philly Fed manufacturing survey (7/19); options expiration (7/20).

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July 13th

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources
Valence Technology Files for Bankruptcy Protection
Battery maker Valence Technology Inc. said yesterday that it filed for chapter 11 protection in hopes of boosting its liquidity and refocusing itself on its core lithium phosphate markets.

Peregrine Financial Group Inc. Trustee Outlines Plans
The trustee overseeing Peregrine Financial Group Inc. on Thursday outlined plans for the liquidation of the failed U.S. brokerage, seeking court permission to run the business and retain some staff, according to the Wall Street Journal. A Connecticut firm that specializes in trading bankruptcy claims is offering customers of Peregrine Financial Group 20 cents to 25 cents on the dollar for their claims following the futures broker’s collapse earlier this week.

In General Economic News

Banks Could Cause Swell of New Foreclosures Next Year
Banks are increasingly placing homes with unpaid mortgages on a countdown that could deliver a swell of new foreclosed properties onto the market by early next year, potentially weighing further on home values. June provided the latest evidence of this trend, as the number of U.S. homes entering the foreclosure process for the first time increased on an annual basis for the second month in a row, foreclosure listing firm RealtyTrac Inc. said Thursday. California in particular saw a big spike in foreclosure starts, or homes placed on the foreclosure path for the first time. They increased 18 percent versus June last year, the firm said. The increase in foreclosure starts comes as banks make up for time lost last year as the mortgage-lending industry grappled with allegations that it had processed foreclosures without verifying documents. The nation’s biggest mortgage lenders reached a $25 billion settlement in February with state officials. And that’s cleared the way for banks to address their backlog of unpaid mortgages.

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July 12th

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

Peregrine Financial Group Chapter 7 Petition Filed
Privately-held Peregrine Financial Group filed for Chapter 7 protection with the U.S. Bankruptcy Court in the Northern District of Illinois. The company provides brokerage, trader education and online trading services through its BESTDirect platform.  Peregrine Financial Group indicated total assets of $500 million to $1 billion.

Dewey & LeBoeuf Seeks $104 Million from Ex-Partners
Dewey & LeBoeuf yesterday proposed a $104 million deal to recoup money from former partners who left the law firm as it teetered on collapse.

Mammoth Lakes Creditor Says Town Ignored Settlement Offers
Mammoth Lakes Land Acquisition, the primary creditor in the chapter 9 bankruptcy case of Mammoth Lakes, Calif., accused the town on Tuesday of ignoring offers to settle the $43 million judgment in an objection to the town’s request for a quick decision on its chapter 9 eligibility.

S&P Cuts San Bernardino, Calif., Refunding Debt to “CC” Rating
Standard & Poor’s Ratings Services yesterday downgraded the San Bernardino, Calif., series 1997A lease revenue refunding bonds to speculative grade “CC” from investment grade ‘BBB+’ a day after the city’s leaders approved a plan for a chapter 9 bankruptcy filing.

In General Economic News

US home foreclosure filings rose in the second quarter for the first time in two years, according to a report released Thursday. During the April-June period, 311,010 properties started the foreclosure process, a 9 percent increase from the previous quarter, said RealtyTrac, a publisher of foreclosure data. The foreclosure starts were up 6 percent compared with the second quarter of 2011, the first annual quarterly rise since the fourth quarter of 2009, RealtyTrac said. In June, foreclosure filings rose annually for the second consecutive month. In the first six months of the year, homes in some stage of the foreclosure process — default notices, auction sale notices and bank repossessions — topped one million, RealtyTrac said.

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July 11th

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

San Bernardino, Calif., Votes to File for Bankruptcy
The city council of San Bernardino, Calif., yesterday voted to file for bankruptcy, marking the third time in recent weeks a city in the most populous U.S. state has opted to seek protection from its creditors.

Broker PFGBest Collapses into Chapter 7 After Hiding Millions
Iowa-based broker PFGBest collapsed yesterday after regulators accused it of misappropriating customer funds for more than two years.

Ocala Funding Files Bankruptcy, Seeks to Examine FHFA 
A funding vehicle once controlled by the now defunct mortgage lender Taylor, Bean & Whitaker Mortgage Corp filed for bankruptcy protection yesterday, and called for an examination of the federal regulator that oversees Freddie Mac.

Palm Tree Farmer Cocopah Nurseries Files for Chapter 11 
Palm tree farmer Cocopah Nurseries Inc. filed for chapter 11 protection on Monday after an out-of-court restructuring, amid diminishing revenue, fell apart.

In General Economic News

JPMorgan to Claw Back Millions after Trading Loss 
JPMorgan Chase & Co. plans to reclaim millions of dollars in stock from executives at the center of the trading blunder that shocked Wall Street.

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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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