href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
April 2, 2010
March Consumer Bankruptcy Filings Reach
Highest Monthly Total Since 2005 Bankruptcy Overhaul
The 149,268 consumer bankruptcies filed in March represented the
highest monthly consumer filing total since Congress overhauled the
Bankruptcy Code in 2005, according to the American Bankruptcy Institute
(ABI), relying on data from the National Bankruptcy Research Center
(NBKRC). The March filing total represented a 23 percent increase from
the March 2009 filing total of 121,413 and a 34 percent increase from
the February total of 111,693. Chapter 13 filings constituted 25 percent
of all consumer cases in March, representing a nearly 3 percent decrease
from February.
href='http://www.abiworld.org/AM/Template.cfm?Section=Monthly_Bankruptcy_Statistics&Template=/MembersOnly.cfm&NavMenuID=3716&ContentID=46994&DirectListComboInd=D'>Click
here to view ABI's monthly consumer statistics charts.
Delaware Diocese to Seek
Mediator
Efforts to name a mediator in the bankruptcy of Delaware's Roman
Catholic diocese have resulted in fights among the debtor, its
insurers and its sex abuse-related creditors, the Deal Pipeline
reported yesterday. Bankruptcy Judge Christopher Sontchi is
scheduled to hear arguments April 6 on the appointment of a mediator,
but Sontchi already vented his frustration on the process in a telephone
status conference on March 26. Catholic Diocese of Wilmington Inc. filed
for chapter 11 on October 18. It is the seventh and most recent diocese
to file for chapter 11 in an attempt to corral abuse-related lawsuits.
Judge Sontchi apparently was not pleased about not being in the loop of
some backroom bargaining that went public, especially since it involved
the use of one of his colleagues. Attempts to hire a mediator brought
objections from other parties as well. Various insurance companies, some
of which had not made a court appearance before, maintain a mediator has
no right to fashion a settlement to which they are party.
title='Read more.'
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005409533'>Read
more.
Pay Garnishments Rise as Debtors Fall
Behind
One of the worst economic downturns of modern history has produced a
big increase in the number of delinquent borrowers, and creditors are
suing them by the millions, the New York Times reported today. No
national statistics are kept, but the pay seizures are rising fast in
some areas - up 121 percent in the Phoenix area since 2005, and 55
percent in the Atlanta area since 2004. In Cleveland, garnishments
jumped 30 percent between 2008 and 2009 alone. In some states, courts
allow creditors to charge high interest rates for years after a lawsuit
is decided in their favor. In others, creditors can win lawsuits by
default and seize wages and bank accounts without a case ever appearing
before a judge.
href='http://www.nytimes.com/2010/04/02/business/economy/02garnish.html?ref=business&pagewanted=print'>Read
more.
Commentary: Financial Overhaul Should Focus
on Correcting the Instability of 'Shadow Banking'
Breaking up big financial institutions would not prevent future
crises, nor would it eliminate the need for bailouts when those crises
happen, according to a commentary in today's New York Times. The
next bailout would not be concentrated on a few big companies, but it
would be a bailout all the same. So the alternative to breaking up big
financial institutions, according to the commentary, is to update and
extend bank regulation. The commentary points out that the U.S. banking
system had a long period of stability after World War II, based on a
combination of deposit insurance, which eliminated the threat of bank
runs, and strict regulation of bank balance sheets, including both
limits on risky lending and limits on leverage, the extent to which
banks were allowed to finance investments with borrowed funds. What
ended the era of U.S. stability, according to the commentary, was the
rise of 'shadow banking': institutions that carried out banking
functions but operated without a safety net and with minimal regulation.
In particular, many businesses began putting their cash, not in bank
deposits, but in 'repo' - overnight loans to the likes of Lehman
Brothers. Unfortunately, repo wasn't protected and regulated like
old-fashioned banking, so it was vulnerable to a pre-1930s-type crisis
of confidence.
href='http://www.nytimes.com/2010/04/02/opinion/02krugman.html?ref=opinion'>Read
more.
Bank of America Extends CARD Act
Protections to Small Business
Bank of America will give small business credit card customers many
of the same protections that consumers now enjoy under stricter
regulations, including an agreement not to raise interest rates on
existing balances, Business Week reported yesterday. Bank of
America plans to give its 2 million small business card customers relief
from fees for going over credit limits and apply their payments to the
portion of their balances with the highest interest rate. Those changes
were mandated for consumer credit cards Feb. 22 under the Credit Card
Accountability, Responsibility, and Disclosure Act passed last year.
However, the law doesn?t cover small business credit cards. Bank of
America's announcement makes it the first major small business card
issuer to commit to not retroactively raising interest rates on old
balances.
href='http://www.businessweek.com/smallbiz/running_small_business/archives/2010/04/bank_of_america.html'>Read
more.
Unsecured Creditors Seek to End Visteon's
Exclusivity
Unsecured creditors of bankrupt auto parts maker Visteon Corp.have
asked the court to terminate the company's exclusivity for proposing a
restructuring plan, Reuters reported yesterday. 'Competing plans are
poised to be filed, and should be parallel-tracked. The official
committee could be a proponent of the rights offering plan or submit a
plan predicated on reinstatement (partially, or in full) of the term
loan,' the unsecured creditors said. Term loans would be rendered
unimpaired under both these alternative plans and would be eliminated as
a voting class, they said. The timing of the filing of the amended plan
seems designed to give it an unfair head start, which will likely lead
to a protracted confirmation battle, the committee said. The committee
added that terminating exclusivity and tracking plans side by side
promotes an efficient reorganization rather than allowing Visteon and
its term lenders' amended plan having a head start.
title='Read more.'
href='http://www.reuters.com/article/idUSSGE6300EZ20100401'>Read
more.
Harrisburg May Miss Loan Payment Tied to
Troubled Incinerator
Harrisburg, Pa.'s state capital, was poised to miss an April 1 loan
payment related to an incinerator whose large debt load has prompted one
city official to raise the option of municipal bankruptcy, Dow Jones
Daily Bankruptcy Review reported today. 'I think it's very
likely' the city would miss a $637,500 payment to Covanta Holdings,
which was hired by a municipal agency, Harrisburg Authority, to run the
incinerator, City Controller Daniel C. Miller said on Wednesday. Michael
Casey, the city's interim business manager, told Miller recently that he
was talking to Covanta about skipping the April payment and working out
a deal on the loan payments, which total $2.55 million this year,
according to Miller. Miller added that city already is facing $4 million
in its own debt service and $1 million in payroll expenses due
yesterday.
Pali Capital Parent Files for Chapter 11
Protection
The parent of Pali Capital, a boutique investment banking firm
specializing in derivatives and fixed income that collapsed in February,
filed for chapter 11 protection yesterday, Reuters reported. The firm,
which once had annual revenue of about $200 million, decided to close
after failing to find a buyer. It had tried to sell itself to a group
advised by former Bear Stearns Cos Chief Financial Officer Sam Molinaro.
It had assets of $716,257 and liabilities of $31.76 million, according
to schedules in its bankruptcy filing. The case is In re Pali
Holdings Inc., U.S. Bankruptcy Court, Southern District of New York,
No. 10-11727.
href='http://www.reuters.com/article/idUSN0115083420100401'>Read
more.
General Growth's Turnaround Opens Door to
More Investors
General Growth and its advisers are considering raising new money by
tapping a pool of investors that are normally inaccessible to companies
in bankruptcy, Dow Jones Daily Bankruptcy Review reported today.
General Growth is in a position to sell securities to institutional
investors like mutual funds that focus on public markets, company
advisers say. That's because of the company's success following the
largest real-estate bankruptcy ever: the company is solvent and its
stock has value. General Growth, the second-largest mall owner in the
country, said late on Wednesday in court papers that it has negotiated
financing commitments for $6.5 billion in new equity capital from
Fairholme Capital Management, Brookfield Asset Management and Pershing
Square Capital Management. Under the deal, the equity capital will be
invested at $15 per share. The stock closed at $16.09 Wednesday, up from
about 60 cents per share when General Growth filed for bankruptcy last
April.
Rock & Republic Files for Chapter
11
Denim company Rock & Republic said yesterday that it filed for
chapter 11 protection, Reuters reported yesterday. The company, which
sells its jeans and accessories in stores including Bergdorf Goodman and
Bloomingdales, said it obtained $7.5 million in debtor-in-possession
financing from CIT Group. Geoffrey Lurie, who previously headed The
North Face's turnaround, will join Rock & Republic as chief
restructuring officer, the company said. Read
more.
Benmosche Upbeat on AIG Prospects
Robert Benmosche, CEO of American International Group Inc., pointed
to several recent developments that he sees as good signs for the
struggling insurance giant, which is trying to become an independent
company again after receiving a massive government bailout, the Wall
Street Journal reported today. Ratings agency Standard & Poor's
yesterday raised its 'standalone' credit rating on AIG by a notch to
double-B, a speculative-grade rating two notches below the
investment-grade category. The standalone rating represents what AIG
would be rated if it wasn't supported by the U.S. government, which has
committed as much as $182.3 billion in taxpayer funds to AIG, in part to
help maintain the company's credit rating at single-A-minus so it could
remain in business. Benmosche said that AIG has made significant
progress in asset sales, in reducing risk exposures at its derivatives
unit, and dealing with a controversial set of bonus payments earlier
this month. He also said he was confident that AIG's agreement to sell
its American International Assurance unit to Prudential PLC for $35.5
billion would be completed.
href='http://online.wsj.com/article/SB10001424052702304539404575157620805794344.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
International
Click here to review
today's global insolvency news from the GLOBAL INSOLvency site.