Insolvency Alerts November 2011

Insolvency Alerts November 2011

NOVEMBER 27, 2011

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

Harrisburg Bankruptcy Petition Thrown Out
The bankruptcy case filed by Harrisburg, Pa., was thrown out on Wednesday by Bankruptcy Judge Mary D. France who ruled the city council was not authorized to file the petition.

PMI Files for Bankruptcy as Regulators Take Over Mortgage Insurer’s Unit
PMI Group Inc. filed for chapter 11 protection after the mortgage insurer lost a court bid to undo the takeover by Arizona regulators of PMI Mortgage Insurance Co., its main unit.

Rothstein Trustee Files Wave of Clawback Suits Before Deadline
The trustee liquidating Ponzi-scheme operator Scott Rothstein’s defunct law firm has filed 37 lawsuits to recover funds for the firm’s creditors.

And in General Economic News
U.S. Banks Stronger
U.S. lenders had net income of $35.3 billion in the third quarter, their best performance in four years, as loan-loss provisions and net charge-offs declined, the Federal Deposit Insurance Corp. said Wednesday. Bank profits rose as lenders put aside 47 percent less money for bad loans and charge-offs fell by 39 percent, the FDIC said in its Quarterly Banking Profile released in Washington. Loan losses fell for a fifth straight quarter and were concentrated among larger banks, with some of the biggest cuts occurring at credit-card issuers.

U.S. Spending Weaker
Americans pulled back on spending in October and manufacturers received fewer orders for durable goods, tempering expectations for a pickup in economic growth in the fourth quarter. Consumer purchases, which account for 70 percent of the economy, increased 0.1 percent after a 0.7 percent gain in September, Commerce Department figures showed today in Washington.

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NOVEMBER 22, 2011

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

S&P Downgrades Clearwire Debt By a Notch

Standard & Poors Corp. yesterday downgraded Clearwire Corp.’s credit rating by one notch to ‘CCC’ with a “developing outlook” due to concerns that it may skip interest payments due on Dec. 1.

Publisher Local Insight Exits Chapter 11
Yellow Pages directory publisher Local Insight Media Holdings Inc. has exited chapter 11 after the company’s reorganization plan took effect on Nov. 18, and the debtor became Berry Co. LLC.

And in General Economic News

U.S. Economic Growth Revised Down to 2 Percent
The New York Times reports today that the U.S. economy grew at a slightly slower pace than previously estimated in the third quarter, but adds that weak inventory accumulation amid sturdy consumer spending strengthened analysts’ views that output would pick up in the current quarter.

Auto Loan Delinquency Rate Decreases
The national auto loan delinquency rate (car loans 60 or more days past due) decreased on a year-over-year basis for the eighth consecutive quarter, dropping from 0.58% in Q3 2010 to 0.47% Q3 2011 according to TransUnion. However, auto delinquencies rose slightly for the quarter, moving up from 0.44% in Q2 2011.

Consumer Spending May Have Climbed in October
Consumer spending probably climbed in October as incomes grew by the most since May, economists said a report will show this week. Purchases rose 0.3 percent last month, according to the median estimate of 69 economists in a Bloomberg News survey before Commerce Department figures due on Nov. 23.

Senior Healthcare Providers at Risk
The Distressed Debt Report for November 8, 2011 states that senior healthcare providers face serious cash flow problems in the year ahead and many may need restructuring

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NOVEMBER 20, 2011

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

Detroit Bankruptcy Filing Could Be on the Horizon
Detroit has until spring to straighten out budget problems or face bankruptcy or, worse, potential default on its largest debt obligations, according to CNN on Friday. “Without change, the city could run out of cash by April, with the potential cash shortfall of $45 million by the end of the fiscal year,” Detroit Mayor Dave Bing said.

General Maritime Seeks Chapter 11, Reaches $175 Million Deal with Oaktree
Oil-tanker company General Maritime Corp. filed for chapter 11 protection Thursday after securing its lenders’ support for a restructuring that envisions a new $175 million equity infusion from affiliates of Oaktree Capital Management LP, Dow Jones Daily Bankruptcy Review reported Thursday. In court papers filed Thursday, the operator of a fleet of 33 vessels said these deals will ensure its ability to slash debts, boost liquidity and preserve more than 1,000 jobs.

General Maritime Corp., the second- largest U.S. owner of oil tankers. It cited falling oil demand and a surplus of ships that led to two years of losses.

And in General Economic News

Banks’ Critic Poised to Be Head of FDIC
Until retirement last month, Thomas Hoenig was a consistent thorn in Ben Bernanke’s side, voting against easy-money policies at each policy-making meeting in 2010. Now, the former Kansas City Fed president will be a thorn for the nation’s biggest banks, according to the Wall Street Journal.

The Senate appears likely to confirm Hoenig to a six-year term as vice chairman of the Federal Deposit Insurance Corp. The choice has rattled Wall Street. Hoenig believes some banks are so big that they are a risk to the financial system. “We must break up the largest banks,” he said in a February speech, arguing that regulators could do so by restricting the activities of government-backed banks “and significantly narrowing the scope of institutions that are now more powerful and more of a threat to our capitalistic system than prior to the crisis.”

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NOVEMBER 17, 2011:

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

Trailer Bridge Inc. Files for Chapter 11 bankruptcy
Trailer Bridge Inc., a Jacksonville, Fla.-based trucking and marine freight company, filed for Chapter 11 bankruptcy a day after its senior secured debt became due.

SP Newsprint Files Chapter 11 Bankruptcy
SP Newsprint Holdings, a newsprint production and recycling company owned by billionaire Peter Brandt, filed for Chapter 11 bankruptcy, blaming a weak economy and rising raw material prices for its distress.

Beacon Power Corporation files for Chapter 11
Massachusetts-based energy technology company Beacon Power Corporation filed for Chapter 11 restructuring in the U.S. Bankruptcy Court for the District of Delaware on October 30. The company received a $43 million Department of Energy loan guarantee in August 2010 to build a 20 MW flywheel energy storage facility in Stephentown, NY, and told the court last week that it has a viable business model with revenue generating assets that should enable the company to achieve profitability in the future.

Advanta Corp. is Filing Preference Complaints
The Liquidating Trust in the Advanta Corp. bankruptcy has begun filing preference complaints. Advanta filed bankruptcy in November,2009. Advanta was at one time one of the largest issuers of “business purpose credit cards” in the United States.

Readers are advised to remember that preference suits in bankruptcy court are served via regular mail, and the answering pleading is often due in a matter of weeks. Anyone who dealt with Advanta is well-advised to watch their mailrooms carefully.

And in General Economic News

The Labor Department reported Thursday that the number of people seeking unemployment benefits last week fell to the lowest level in seven months. The Commerce Department reported that permits for future home construction rebounded strongly last month. These reports bolster the view that the country’s economic recovery is gaining traction.
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NOVEMBER 16, 2011:

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

Dynegy Files for Chapter 11.
Dynegy Inc.’s holding company filed for chapter 11 protection in a way that could cause losses for bondholders without harming parent-company shareholders, the Wall Street Journal reported. Other Dynegy Holdings subsidiaries also filed for bankruptcy protection, although Dynegy’s parent company was not part of the filing. Dynegy has proposed to reorganize its corporate structure in a way that protects shareholders from a bankruptcy filing.

Harrisburg PA Bankruptcy.
Harrisburg’s leaders agreed to sell municipal assets as part of a plan to keep Pennsylvania’s bankrupt capital from becoming the first city put under a receiver through the state’s law to manage fiscal crises, Bloomberg News reported today. During a public meeting yesterday mandated by the law, Mayor Linda Thompson and five of seven city council members also decided to ask municipal creditors such as Assured Guaranty Municipal Corp. to forgive $100 million in debt. With negotiations

And in General Economic News

Corporate Bankruptcy Filings Leveling Off.
Corporate bankruptcy filings are leveling off after months of steady declines, hinting at the quickening undercurrent of distress felt across a spectrum of U.S. businesses, Dow Jones Daily Bankruptcy Review reported. Epiq Systems Inc. reports that 5,671 businesses filed for bankruptcy protection throughout October — only 100 filings fewer than in September — following months of steady declines during the economic quiet period that enabled many financially struggling companies to simply hang on.

Consumers Continue to Cut Debt Levels.
Consumers may have greater access to credit cards, but they nevertheless continue to cut debt levels, a pair of new Federal Reserve reports show. In the monthly G.19 consumer credit report and the quarterly senior loan officer’s survey, the U.S. central bank showed that although access to credit — and consumer demand for credit — continues to improve from low levels seen in the depths of the recession, cardholders are adamant about paying down their debt.

More Homeowners Having Harder Time Making Mortgage Payments.
The rate that mortgage holders were late with their payments by 60 days or more rose in the June-to-September period for the first time since the last three months of 2009, according to TransUnion. The credit reporting agency said 6.44 percent of homeowners missed two or more payments, an early sign of possible foreclosure. That was up from 5.88 percent in the third quarter of 2010, and from 5.82 percent in the 2011 second quarter. Foreclosures on delinquent U.S. mortgages have almost doubled from this time last year, according to the latest reading from Fitch Ratings. The higher foreclosure rates mean U.S. housing prices will probably fall another 10 percent before stabilizing, the ratings agency said Monday.

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NOVEMBER 15, 2011:

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

Harrisburg Misses Deadline for Bankruptcy Plan
The capital of Pennsylvania will let the state or a federal bankruptcy judge determine how it will get out of $318 million in debt after missing the last deadline on Monday to come up with a solution of its own, Reuters reported today. Harrisburg had until 5 p.m. Monday to come up with its own plan.

Dodgers to Sell Team, Telecast Rights Separately
After reaching an agreement with Major League Baseball, bankrupt Los Angeles Dodgers LLC is looking to sell its team and its telecast rights separately, with the team sale being completed by April 30, The Deal Pipeline reported yesterday. The Dodgers will proceed with a reorganization plan built around the sale of 100 percent of the team’s equity.

A&P Seeks to Exit Chapter 11 with Financing from Yucaipa
The Great Atlantic & Pacific Tea Co. on Tuesday filed a plan to exit chapter 11 with the help of new debt and equity financing from supermarket mogul Ron Burkle’s Yucaipa Cos. and two other groups, Dow Jones Daily Bankruptcy Review reported yesterday

And in General Economic News

U.S. Retail Sales Likely Climbed in October
Retail sales in the U.S. probably rose in October as demand for automobiles improved, giving the U.S. economy a boost entering the final quarter of 2011, economists said in a report today, according to Bloomberg News. The 0.3 percent gain would follow a 1.1 percent September increase.

Inflation Remains Moderate
The Labor Department may also report today that the producer price index fell 0.1 percent last month after advancing 0.8 percent in September, according to the survey Median. Core prices, which exclude volatile food and fuel costs, may have climbed 0.1 percent from the prior month and 2.8 percent from October 2010, economists forecast.

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NOVEMBER 8, 2011:

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

State Must Refund Taxes Madoff Victims Paid on ‘Phantom Income’
Investors in Madoff’s Ponzi scheme are entitled to refunds on state taxes paid for gains that never existed, a New Jersey Tax Court judge held Tuesday. The court concluded that the investors did not and could not constructively receive the money they had reported as income and that there is no reason why they should not be permitted to amend and correct their returns to remove income that was never properly taxable.

After $5.1 Billion Loss, Postal Service Predicts Weaker 2012
The Postal Service is forecasting a record $14.1 billion loss for 2012, as a drop in mail volume accelerates, Bloomberg News reported yesterday. The amount of mail delivered by the Postal Service will probably fall about 6 percent in 2012, exceeding the drop of about 2 percent a year earlier. Revenue is expected to decline to $64 billion in 2012, from $65.7 billion in 2011. The Postal Service said it might run out of cash by next September.

AMR Bankruptcy Risk Rises as Lack of Pilot Deal Narrows Options
AMR Corp. may need to weigh a bankruptcy filing after a second round of stepped-up talks with American Airlines pilots failed to produce an agreement on a cost-saving contract, Bloomberg reported today. Directors should consider alternatives now rather than watch cash reserves keep dwindling without a labor accord, said Jeff Kauffman, a Sterne Agee & Leach Inc. analyst in New York who cut his rating.

And in General Economic News

More Foreclosures on the Way
Defaults on first mortgages rose last month as defaults on other credit categories declined, the S&P/Experian Consumer Credit Default Indices reported today. First mortgage default rates rose to 2.08 percent in October from September’s 1.99 percent. As mortgage defaults increased, however, defaults on auto loans and second mortgage default rates decreased slightly. Auto loans moved down from 1.29 percent in September to 1.22 percent; second mortgage defaults fell from 1.32 percent to 1.29 percent. Bank card default rates declined even more, from 5.36 percent in September to 4.85 percent.

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NOVEMBER 3, 2011:

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

Syms, Filene’s Basement File for Chapter 11
Discount retailer Syms and its Filene’s Basement subsidiary filed for chapter 11 protection with plans to liquidate.

And in General Economic News

Outstanding Consumer Debt Rises
Outstanding consumer debt reached $11.2 trillion in September, on par with pre-recession levels, according to credit bureau Equifax. The figure is below the peak level of $12.4 trillion reached in October 2008 but is still higher than the $11.1 trillion recorded in 2006. The numbers suggest some banks are beginning to expand lending in some loan categories and consumers, who have worked diligently to pay off debt since the recession hit, are more willing to use credit again.

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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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