January 42010

 

Analysis: Recession
Aftershocks Likely to Bring More Filings in 2010

Experts predict that the increase in bankruptcies in
2009 is unlikely to let up in 2010 as the economic crisis trickles down
to the retail and commercial real estate sectors, and media companies
continue to struggle to monetize their product amid a changing
technological landscape,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. In the first 11 months of 2009, 82,000
commercial bankruptcies were filed, according to the Bankruptcy Database

Project at Harvard University, and those numbers are only expected to
rise, despite signs that the economy is starting to bounce back. ABI
President
face='Times New Roman' size='3'>Bob Keach of
Bernstein Shur said that, ironically, there tend to be more
bankruptcy filings at the beginning of recoveries as companies run out
of financial resources to avoid a filing. With unemployment high and
consumer confidence low, a 2009 holiday shopping season expected to be
even worse than 2008 could push more retail companies into bankruptcy
this year. The National Retail Federation forecast that holiday sales
would be down 1 percent between 2009 and 2008. America's Research Group,

a market research firm, forecast Christmas sales in 2009 would be down
1.2 percent compared to 2008. On the heels of struggling merchants,
commercial real estate companies will also be at risk for increased
bankruptcy in 2010, experts said. Traditional media companies will
continue to take a hit, according to experts, as readers continue
migrating to new media and overleveraged companies scramble to meet
their obligations. ABI Executive Director
face='Times New Roman'>

size='3'>Samuel Gerdano said that he thought
there would be more consolidation or joint-operating agreements in the
media industry this year as a way to stave off newspaper closings. As
the credit markets begin to loosen up in 2010,
size='3'>Doug Foleyof McGuireWoods LLPsaid
that bankruptcy courts could see more reorganizations and restructuring
this year than they did in 2009, when many businesses had no choice but
to liquidate their assets. 
href='http://bankruptcy.law360.com/articles/140102'>Read more.
 (Subscription required.)

Bankruptcy Legislation to
Watch in 2010

While Congress will primarily focus on health care,
economic recovery and midterm elections in the year ahead, a few
bankruptcy issues that could still catch legislators' attention in
2010,

size='3'>Bankruptcy Law360 reported on Friday.

BAPCPA’s provisions that targeted businesses could be rolled back
amid the continued uncertainty in the economy. Prior to 2005, the
exclusivity period for debtors had no statutory time limit, and judges
frequently granted debtors' requests to extend the period. However, the
law created an 18-month ceiling for debtor exclusivity, which has proved

problematic for companies trying to devise a reorganization strategy.The

law also created a 210-day time limit for debtors to accept or reject
certain leases, unless the landlord consents to more time. Finally, the
law allowed vendors to assert a priority administrative claim for the
value of goods delivered within 20 days before the bankruptcy if the
goods were sold in the ordinary course of business.Prior to BAPCPA, the
Bankruptcy Code allowed for derivatives, swaps and forward agreements to

be exempt from the automatic stay. BAPCPA expanded those protections to
certain financial contracts, a provision that has come under fire in the

wake of the financial crisis.Some have argued the Bankruptcy Code is
insufficient to deal with large, financially complex corporations in
need of reorganization and have proposed creating a new chapter under
the Code to deal with these firms. In response, Rep. Spencer Bachus
(R-Ala.) last July introduced the Consumer Protection and Regulatory
Enhancement Act, which would create a chapter 14 under the Bankruptcy
Code that would provide for the resolution of insolvent nonbank
financial institutions in order to end the government bailouts of large
financial firms that have occurred in the past. Another proposal that
could see new life this year is the Protecting Employees and Retirees in

Business Bankruptcies Act of 2007, which aims to increase workers'
recoveries in bankruptcy, increase the power of unions in bankruptcy
negotiations and halt exorbitant executive pay schemes.Specifically, the

bill as proposed in 2007 would have increased the amount of cash
employees can claim for wages against the bankruptcy estate. Employees
can currently claim up to $10,950 in unpaid wages within 180 days prior
to the bankruptcy, but the bill would have increased that amount to
$20,000 and eliminated the 180-day requirement. 
href='http://bankruptcy.law360.com/print_article/141166'>Read more.
 (Subscription required.)

Judge Denies Renaissant
Lafayette’s DIP Loan

Bankruptcy Judge

face='Times
















New










Roman'

size='3'>Pamela Pepper on Wednesday denied
Renaissant Lafayette LLC's $7.5 million debtor-in-possession financing
and instead ordered the bankrupt luxury condominium development operator

to take on a much smaller, short-term loan from its prepetition
lender, The Deal Pipeline reported

on Thursday. Judge Pepper rejected Renaissant's request to tap into
$250,000 of a DIP from Mallory Properties LLC in response to objections
from senior lender Amalgamated Bank, filings show. The proposed DIP was
priced at a fixed 15 percent and carried a 2 percent commitment fee. It
was to mature on the earlier of Dec. 31, 2014, and the date by which 70
percent of the total residential units at Renaissant's development are
sold. About $3.6 million of the DIP was to be placed into a reserve and
used if certain trade creditors were legally deemed to have a mechanic's

lien that must be paid. The rest of the reserve, if there is anything
left over, was to be used to help satisfy senior lender Amalgamated
Bank's prepetition senior debt. Another $1.4 million of the DIP was to
be earmarked for prepetition senior debt, with $400,000 to be paid to
Amalgamated upon final DIP approval and the $1 million balance given to
the bank once Renaissant's reorganization plan takes effect. 

href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005371538'>Read

more.  (Subscription required.)

Analysis: U.S. Loan Effort
Seen as Adding to Housing Woes

The Obama administration’s $75 billion program
to protect homeowners from foreclosure has been widely pronounced a
disappointment, and some economists and real estate experts now contend
it has done more harm than good, the

face='Times
















New










Roman'

size='3'>New York Times reported on Saturday.
Since President Obama announced the program in February, it has lowered
mortgage payments on a trial basis for hundreds of thousands of people,
but has largely failed to provide permanent relief. Critics increasingly

argue that the program, Making Home Affordable, has raised false hopes
among people who simply cannot afford their homes. As a result,
desperate homeowners have sent payments to banks in often-futile efforts

to keep their homes, which some see as wasting dollars they could have
saved in preparation for moving to cheaper rental residences. Some
borrowers have seen their credit tarnished while falsely assuming that
loan modifications involved no negative reports to credit agencies. Some

experts argue the program has impeded economic recovery by delaying a
wrenching yet cleansing process through which borrowers give up
unaffordable homes and banks fully reckon with their disastrous bets on
real estate, enabling money to flow more freely through the financial
system. 

href='http://www.nytimes.com/2010/01/02/business/economy/02modify.html?em=&pagewanted=print'>Read

more.

Banks Roll Out New Check,
Card Fees

The nation's banks will be bombarding customers with
new fees and products in 2010 as they try to replace more than $50
billion in revenue wiped out by new rules that clamp down on certain
business practices, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported on Saturday. In addition to attaching new fees to old
products, banks are introducing new types of accounts that they hope
will reel in new customers and reduce their funding costs. For credit
cards, the new rules go into effect in February as part of the Credit
Card Act of 2009. The rules will limit some interest-rate increases,
require more disclosure to customers and prohibit banks from raising
interest rates on current balances unless a customer is at least 60 days

behind in a payment. Credit card issuers collected $22.9 billion in
penalty fees—such as those assessed for late payments—in
2009, up from $19 billion in 2008, said Robert Hammer, who runs a credit

card consulting firm in Thousand Oaks, Calif. Credit card companies
already have been racing to slip new fees and practices into customer
contracts ahead of the law. Issuers are closing accounts, switching
cards with fixed interest rates to variable rates and introducing cards
that have an annual fee. In addition to the credit card rules, the
government will crack down next year on ways banks charge overdraft
fees. New Federal Reserve rules will require banks to receive customer
consent before they can be charged such a fee. The Fed estimates that
banks generate $25 billion to $38 billion a year in overdraft
fees. 

href='http://online.wsj.com/article/SB10001424052748704162104574630360393559766.html?mod=WSJ_hp_mostpop_read'>Read

more. (Subscription required.)

Credit Suisse Accused of
Defrauding Resort Investors

The Credit Suisse Group has been sued for $24 billion
by property owners who claim that the Swiss bank schemed to defraud
investors in several resort communities, including the bankrupted
Yellowstone Club, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. In a lawsuit filed Sunday, the plaintiffs
alleged that Credit Suisse colluded with Cushman & Wakefield, a real

estate firm and co-defendant in the case, in a “loan-to-own”

scheme to artificially inflate the value of resort projects. The
plaintiffs said that this scheme was intended to burden resorts and
purchasers of property in resorts with too much debt, while winning
Credit Suisse “enormous fees” and letting the bank foreclose

on or take control of resorts at well below market value. The lawsuit
claims losses related to Yellowstone, a private club for millionaires in

Montana, as well as to Lake Las Vegas in Nevada, the Tamarack resort in
Idaho, and Ginn sur Mer on Grand Bahama Island. 

href='http://www.nytimes.com/2010/01/05/business/05resort.html?ref=business'>Read

more.

Goldman Sachs Helps Trucking

Company after Union’s Plea

Goldman Sachs Group Inc. helped YRC Worldwide Inc.
complete a debt swap to avert bankruptcy after the Teamsters union said
that the bank was trying to profit from a failure of the largest U.S.
trucker by sales, Bloomberg News reported on Friday. YRC, which has
posted $1.7 billion in losses in the past five quarters, needed to
complete the exchange by Dec. 31 to avoid a bank payment that would have

left the trucker in an “unsustainable” position, the
Overland Park, Kan.-based company said in a regulatory filing two weeks
ago. International Brotherhood of Teamsters President James Hoffa said
in letters last month to regulators and lawmakers that Goldman Sachs and

Deutsche Bank were among banks that “have a history of making
markets in these types of derivative financial products.” Goldman
Sachs said on Dec. 17 that the bank was “actively exploring ways
to help” YRC. 

href='http://www.bloomberg.com/apps/news?pid=20601009&sid=akW2fq12ZKOA'>Read

more.

Federal Reserve Chief Blames

Economic Crisis on Lax Regulatory Oversight

Federal Reserve Chairman Ben S. Bernanke said
yesterday that regulatory failure, not low interest rates, was
responsible for the housing bubble and subsequent financial crisis of
the last decade, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. “Stronger regulation and supervision
aimed at problems with underwriting practices and lenders’ risk
management would have been a more effective and surgical approach to
constraining the housing bubble than a general increase in interest
rates,” Bernanke said. He addressed accusations that the Fed
contributed to the financial crisis by arguing that the interest rates
set by the central bank from 2002 to 2006 were appropriately low.
Bernanke echoed his previous calls for Congress to grant the Fed greater

oversight powers over the financial system, like the ability to help
monitor and regulate against “systemic risk.” 

href='http://www.nytimes.com/2010/01/04/business/economy/04fed.html?ref=business&pagewanted=print'>Read

more.

Pharmaceutical Company Could

Seek Bankruptcy after Merger Attempts Fail

Anesiva Inc., a developer of pharmaceutical products
for chronic pain, said that it is looking at filing for bankruptcy after

it was unable to complete a proposed merger with Arcion Therapeutics
Inc., Reuters reported on Thursday. Anesiva said that it had failed to
satisfy closing conditions of the deal. The company had announced the
deal earlier this month, saying the merger was contingent on it working
with creditors and resolving certain ongoing litigation. 
href='http://www.reuters.com/article/idUSN3119934920091231'>Read
more.

Colorado Bankruptcy Cases
Up a Third in 2009

Bankruptcy filings soared in Colorado in 2009, as
consumers and small businesses struggled to find their footing amid the
worst recession in decades, the Denver Business Journal
reported today. A total of 25,624 bankruptcy cases were filed in U.S.
Bankruptcy Court for the District of Colorado during the first 11 months

of the year, up nearly 34 percent from the same period in 2008. That put

the state on track to exceed the 25,776 filings made in 2003, during
Colorado’s most recent previous economic downturn. 

href='http://denver.bizjournals.com/denver/stories/2010/01/04/story1.html'>Read

more.

International

Click here to review

today's global insolvency news from the GLOBAL INSOLvency site.