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April 24, 2006
name='1'>Commentary: Bankruptcy Law Changes Are Being
Felt
Six months after a
tougher consumer bankruptcy law went into effect, a picture is now
beginning to emerge of the debtors who have undergone required credit
counseling and education before they file for bankruptcy to show that
they are legitimate candidates for bankruptcy, according to a commentary
in the Dallas Morning
News today. Those who sought help from
Consumer Credit Counseling Service of Greater Dallas had an average
gross income of $34,200 and an average $13,400 in unsecured debt and
five credit cards.
size='3'>The lending industry, which is pleased with the new law, said
change was sorely needed to stem the rise in bankruptcies –
particularly abusive filings. But consumer advocates and bankruptcy
attorneys said no one who files for bankruptcy is happy about it, and
most have been driven to it by a job loss, divorce or health problems.
Nationally, debtors who received pre-filing counseling had average debts
of $40,673 and an average income of just $31,255, according to a survey
by the National Foundation for Credit Counseling,Consumers filed for
bankruptcy in record numbers last year, resulting in one personal
bankruptcy for every 60 households, according to the American Bankruptcy
Institute.'The latest
report underscores the level of financial stress for
w:st='on'>
size='3'>U.S.
size='3'>families,' said Samuel J. Gerdano, executive director of
the institute.
href='http://www.dallasnews.com/sharedcontent/dws/bus/columnists/all/stories/…'>Read
more. (Free registration required.)
name='2'>Congress Struggles with Pension Bill
Squabbles over special
treatment for bankrupt airlines and beleaguered auto companies are
delaying final action in Congress on a pension bill that would affect
millions of workers, retirees and taxpayers, the Associated Press
reported yesterday. Lawmakers trying to merge House and Senate versions
already have missed one deadline, April 15, when some companies had to
recalculate their pension fund obligations. Memorial Day, May 29, is the
new target for sending to President Bush a bill to prop up the finances
of defined-benefit pension plans covering some 44 million people in
the
face='Times New Roman' size='3'>United
States
href='http://www.nytimes.com/aponline/us/AP-Congress-Pensions.html?_r=1&oref=…'>Read
more.
name='3'>Asbestos Ruling and $13 Million Fine Threaten Bankruptcy
Firm
After years of
representing companies forced into bankruptcy because of asbestos
liability, Gilbert Heintz & Randolph LLP now has its own financial
problems to worry about after a federal judge penalized it $13 million
for conflicts of interest in one of those cases, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Judge
size='3'>Kathryn Ferguson slapped Gilbert
Heintz with the fine after she found that conflicts 'permeated every
aspect of GH&R's decison making' when the firm represented Congoleum
Corp. in its bankruptcy filing while at the same time representing about
10,000 people with asbestos claims against the New Jersey flooring
manufacturer. Gilbert Heintz was ordered to withdraw from the bankruptcy
case, but in March, the judge still ordered it to give back $9.6 million
in fees and expenses it had received and to forfeit an additional $3.3
million not yet paid. Last week, Judge Ferguson entered an order
authorizing a committee of Congoleum's bondholders to pursue a
malpractice suit against Gilbert Heintz. In a motion filed in late
March, the law firm claimed it could be 'irreparably harmed' if Judge
Ferguson did not delay her penalty while the firm pursues an appeal
because Gilbert Heintz's 'present net worth is substantially less than
the amounts ... ordered disgorged.' A hearing on the motion is scheduled
for today.
href='http://online.wsj.com/article/SB114583079091933552-email.html'>Read
more. (Registration required)
Autos
name='4'>Commentary: The Automobile Industry Isn't Going South, It's
Just Moved There
Beyond the figurative
saying regarding its financial state, the domestic automobile industry
has gone South, literally, according to a column in
Sunday’s
size='3'>Washington Post. The South has risen
again, this time aided by a massive restructuring of the global
automotive industry that is moving parts and assembly plants from the
Midwest and the North in the United States, as well as from Europe and
Asia, down to the land that once grew cotton where old times and friends
are not forgotten. The
w:st='on'>
size='3'>U.S.
size='3'>automotive industry and related manufacturing businesses are
'transforming, not disappearing,' said Kathleen A. Ligocki, president
and chief executive officer of Tower Automotive Inc., a major
Michigan-based automotive supplier currently reorganizing its North
American operations under Chapter 11 bankruptcy protection. 'While
historic, high-cost unionized manufacturing generally located in the
Midwest and Upper East Coast is slowly lumbering to dinosaurian
extinction, the Old South is rising,' Ligocki said last week in a
size='3'>Washington
address at ABI’s Annual Spring Meeting
size='3'>.
href='http://www.washingtonpost.com/wp-dyn/content/article/2006/04/21/AR20060…'>Read
more.
GM
Faces Skeptics of Its Positive Predictions
General Motors Corp.
still has more convincing to do that it will regain its financial
footing following its release of quarterly earnings that exceeded
estimates, the Detroit
Free Press reported on Saturday. At a speech
at ABI’s Annual Spring Meeting on
Friday morning, Kathleen Ligocki, the chief executive of
automotive-parts
w:st='on'>
size='3'>supplier
face='Times New Roman' size='3'>Tower
Automotive Inc., asked a crowd of bankruptcy attorneys
and other legal professionals if GM 'will be saved by a Hail Mary pass.'
None in the crowd of a few hundred people raised a hand. Ligocki, whose
own Novi, Mich.-based company is in bankruptcy protection, said that
both GM and Ford Motor Co. will need to shrink to survive.
href='http://www.freep.com/apps/pbcs.dll/article?AID=2006604220325&template=p…'>Read
more.
name='6'>Bankruptcy Judge Says Settlement Between
w:st='on'>
size='3'>Spokane
and Abuse Victims Illegal
A federal bankruptcy
judge says the nearly $46 million settlement between the Roman Catholic
Diocese of Spokane and sex-abuse victims is legally unacceptable, the
Associated Press reported on Saturday. In a hearing Friday, Judge
Patricia Williams
said the deal can't be approved because it favors one
group of victims over another. 'This settlement violates a rule that
requires fair treatment,' Juge Williams said, adding that bankruptcy
'can't treat people differently.' The diocese filed for chapter 11
bankruptcy in 2004 because of sex-abuse claims and has offered to
settle the claims of 75 victims for $45.7 million. More than 100 other
claims have been filed since. The diocese is reviewing 'claims of proof'
filed by claimants not covered by the so-called 'universal settlement,'
but no sum has been attached to their claims. Williams stopped short of
ruling against the settlement offer, but warned attorneys for both sides
that she expected the matter to be settled quickly.
href='http://seattletimes.nwsource.com/cgi-bin/PrintStory.pl?document_id=2002…'>Read
more.
Airlines
name='7'>Delta Pilots to Vote on Deal That Reduces
Pay
Delta Air Lines pilots
will hold a ratification vote next month on a proposed contract that
would extend a 14 percent pay cut made in December but give them a $2.1
billion claim that would convert to a still-to-be-determined stake in
the carrier when it emerges from bankruptcy, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The governing committee of the Air Line Pilots
Association unit at Delta agreed by a 12-to-1 vote late Friday to
endorse a tentative contract deal reached April 14 that averted for now
a potentially catastrophic strike at the third-largest U.S. carrier as
measured by traffic. The ratification vote by about 6,000 Delta pilots
is scheduled to be completed by May 31, and the governing committee's
backing of the proposed contract is likely to carry substantial weight
with rank-and-file pilots. Delta is seeking to trim costs to emerge from
bankruptcy protection in better shape to cope with surging fuel prices
and intense industry competition.
href='http://online.wsj.com/article_print/SB114567588280233268.html'>Read
more . (Registration required)
name='8'>Mesaba Seeks New DIP Lender
Defunct regional airline
carrier Mesaba Aviation Inc. is seeking bankruptcy court permission to
pay the expenses for new debtor-in-possession (DIP) lenders, after MAIR
Holdings Inc., the original financier, lapsed on its financing
commitment, Portfolio
Media reported on Friday. Mesaba, the regional
partner of Northwest Airlines Corp., expressed in court papers filed
with the U.S. Bankruptcy Court for the District of
face='Times New Roman'>
face='Times New Roman' size='3'>Minnesota
that if it doesn’t obtain a DIP loan soon,
“it will be unable to operate its business in the normal course
post-petition.” When Mesaba filed for chapter 11 last October, the
company received a $35 million funding commitment from MAIR, its parent
company. But MAIR allowed the commitment to expire. Even prior to the
petition date, Mesaba engaged in extensive negotiations with MAIR
regarding the necessary post-petition financing. The negotiations
culminated in a financing commitment letter dated Oct. 12, 2005, court
documents show. The case is
size='3'>Mesaba Aviation Inc., case no.
05-39258, in the U.S. Bankruptcy Court for the District of
Minnesota.
w:st='on'>
name='9'>Ohio
size='3'> Bankruptcies Decline
The U.S. Bankruptcy Court
for the Southern District of Ohio, which includes offices in Columbus,
Cincinnati and Dayton, experienced a 69 percent drop in the number of
bankruptcies filed this January, February and March, compared to the
same period last year, according to
size='3'>Business First of Columbus (Ohio) on
Friday. About 3,189 individuals and businesses filed for bankruptcy
protection in the first quarter, versus the 10,318 that filed in the
first quarter of 2005. According to statistics compiled by the Dayton,
Ohio-based information and legal research company LexisNexis Group,
there were 63,091 chapter 7 filings nationwide in this year's first
quarter, more than 56 percent of the total 111,720 bankruptcy cases
filed. In the
w:st='on'>
size='3'>bankruptcy office, 869 people filed for chapter 7 in the first
quarter, and 597 filed for chapter 13. Throughout the southern district
of Ohio, 1,846 people made chapter 7 filings, while 1,329 filed for
chapter 13.
href='http://www.bizjournals.com/columbus/stories/2006/04/24/story7.html?t=pr…'>Read
more .
name='10'>Krispy Kreme Franchisee Triumphs in Liquidation
Row
As Krispy Kreme Doughnut
Co. continues to struggle with a slew of financial and legal problems, a
federal bankruptcy judge has confirmed the plan of liquidation for its
bankrupt subsidiary, Freedom Rings LLC,
size='3'>Portfolio Media reported Friday. The
news came on Thursday as U.S. Bankruptcy Judge
face='Times New Roman' size='3'>Christopher Sontchi
size='3'>approved the first amended plan of liquidation for the wholly
owned franchisee in U.S. Bankruptcy Court in
w:st='on'>
size='3'>Delaware
Rings, which operated six out of the approximately 360 Krispy Kreme
stores and 50 satellites worldwide, has been parked in bankruptcy
protection since last October. At the time of the filing, the
size='3'>Philadelphia
size='3'>franchisee revealed that it owed Krispy Kreme $24.1 million,
which constituted the majority of its debt. The North Carolina-based
doughnut giant had provided the franchisee with a $500,000
debtor-in-possession loan, while it continued to wind down operations.
The franchisee has now unloaded five of its stores in
w:st='on'>
size='3'>Delaware
w:st='on'>
size='3'>Pennsylvania
Jersey
kiosk in the
face='Times New Roman' size='3'>Philadelphia
size='3'>International
w:st='on'>
size='3'>Airport
case is Freedom Rings
LLC, case number 05-14268, in the U.S.
Bankruptcy Court for the District of Delaware.
name='11'>Refco Reaches $263 Million Deal in PlusFunds
Feud
The creditors of
beleaguered brokerage giant Refco Inc. have reached a $263 million
settlement with Sphinx Managed Futures Fund SPC, putting to end a fight
that erupted after parent company PlusFunds Group Inc. transferred $312
million amid Refco’s collapse
size='3'>, Portfolio Media reported on Friday.
Insiders revealed the settlement news on Friday, with the official
motion expected to be filed soon in the U.S. Bankruptcy Court in
size='3'>Manhattan
past few months, Refco's creditors have been battling the
size='3'>New York
transfer, suing SMFF in December to compel the return of hundreds of
millions of dollars. The creditors claim the funds were inappropriately
transferred out of Refco by PlusFunds Chairman Christopher Sugrue, a
former Refco executive. Once the largest futures broker in the country,
Refco filed for chapter 11 reorganization last October after a $430
million accounting scandal, allegedly orchestrated by former chief
executive Phillip Bennett, came to light. Following the disclosure,
Sughre demanded that the futures broker shift Sphinx's money from
accounts at Refco's unregulated Bermuda-based unit, Refco Capital
Markets Ltd., to a safer, regulated subsidiary.
name='12'>Bankruptcy Filers in
w:st='on'>
size='3'>Not Deterred by New Law's Requirements
Of the debtors who took
financial courses at Consumer Credit Counseling Services in
size='3'>Fayetteville
size='3'>N.C.
half filed for bankruptcy because of medical expenses or job loss,
the Fayetteville
Observer reported yesterday. Since the
implementation of the new law in October, 29 bankruptcy filers from
Cumberland County completed financial counseling at Consumer Credit,
said Patricia Tyson, director of the Fayetteville office, in which all
but two later filed for bankruptcy. After falling in November,
bankruptcy filings have gradually increased each month. In October, 415
people from
face='Times New Roman' size='3'>Cumberland
size='3'>County
for bankruptcy. Before, bankruptcies rarely exceeded 200 a month. After
the new law took effect, few people needed to file for bankruptcy. In
November, there were 10 bankruptcy filings in
w:st='on'>
size='3'>Cumberland
w:st='on'>
size='3'>County
then, bankruptcies started growing. By March, they reached 87. Most
likely, bankruptcies will continue to rise, said Kenneth Banks, a
bankruptcy lawyer in
w:st='on'>Fayetteville
href='http://www.fayettevillenc.com/article?id=231290'>Read
more.
name='13'>Bankruptcy Filing Halts Theater
size='3'>
w:st='on'>Sale
A Proivdence,
R.I., cinema was set to be sold at public
auction, but owner New Concept Entertainment Inc. on Thursday filed a
chapter 7 bankruptcy request in U.S. Bankruptcy Court in
size='3'>Providence
size='3'>Providence
size='3'> (R.I.) Journal reported on Saturday. The
maneuvering comes less than four months after Anthony Gemma and his
partners in Chalkstone Realty LLC sold the property to New Concept on
Jan. 6. Gemma and his partners loaned New Concept $615,000 to buy the
property, which the new owners said they would use to reopen the
neighborhood landmark as a three-screen theater. New Concept intended to
show second-run
size='3'>Hollywood
possibly, to show Spanish-language films to attract the city's
Hispanics.
href='http://www.projo.com/ri/providence/content/projo_20060422_castle22.21ca…'>Read
more. (Free registration required.)
w:st='on'>
name='14'>California
face='Times New Roman' size='3'> Hotel Investors File for
Bankruptcy
USA Capital, a Las
Vegas-based lending company largely owned by two key investors in Hotel
Zoso of
size='3'>Palm Springs
size='3'>Calif.
bankruptcy protection, the
face='Times New Roman' size='3'>Palm
Springs
w:st='on'>
size='3'>Calif.
Sun reported on Saturday. The April 13 filing
occurred the same week Patina Group vacated Hotel Zoso's restaurant Eat
rekindling rumors Hotel Zoso owners Joseph D. Milanowski and Thomas A.
Hantges were primed to sell the hotel. Mark L. Olson, chief operating
officer with
size='3'>USA
bankruptcy action does not involve the
w:st='on'>
Springs
The bankruptcy, filed in U.S. Bankruptcy Court for the Southern District
of Nevada with $900 in assets, seeks restructuring for the company that
used investments from an estimated 3,500 individuals to make short-term
mortgage loans to commercial developers with real estate as collateral.
Attorneys told Bankruptcy Judge
size='3'>Linda Riegle on Monday that it
appeared USA Capital had paid out $9 million in distributions to its
3,600 investors last month, even though it collected only $4.2 million
in interest payments from borrowers. Judge Riegle told them that sounded
like a Ponzi scheme.
href='http://www.thedesertsun.com/apps/pbcs.dll/article?Date=20060422&Categor…'>Read
more.
name='15'>Investment Manager Is Chosen to Administer
size='3'>San Diego
Pension Fund
w:st='on'>San
Diego
system yesterday hired a local investment manager to replace the fund's
former administrator, who was indicted by a federal grand jury in
January a week after he retired, the
size='3'>San Diego Union-Tribune reported on
Saturday. Despite a nationwide search, the system found David B. Wescoe,
executive director of Messner & Smith, a 22-year-old
size='3'>San Diego
size='3'>investment firm, little more than a block from the retirement
fund's downtown offices. He will take the reins May 1 at the retirement
fund, which has been at the center of the city's budgetary and legal
woes. The system has a $1.43 billion deficit caused in part by decisions
by the City Council in 1996 and 2002 to underfund the employee
retirement plan while increasing worker benefits. The fund has been
without a lead administrator since December, when Lawrence Grissom
retired after 18 years. He and four other former pension system
officials were indicted Jan. 6 on wire fraud and conspiracy charges
stemming from the 2002 decision to extend the original underfunding
plan.
href='http://www.signonsandiego.com/news/metro/pension/20060422-9999-7m22pens…'>Read
more.
name='16'>Commentary:
w:st='on'>West
Virginia
Dangerous
Throughout the nation,
states have been responding to underfunded pensions for public employees
by changing their types of retirement systems, but West Virginia, the
most underfunded public employee pension system in the nation, has gone
back to the type of system that caused the problem, according to an
editorial in the
size='3'>Wheeling (W. Va.)News-Register. For
many years,
face='Times New Roman' size='3'>West
Virginia
other states offering public employees defined benefit pension programs.
They promised set levels of retirement benefits regardless of how much
money was put into them, which helped to create a Teachers Retirement
System with an unfunded liability of about $5 billion. The National
Association of State Retirement Administrators ranks the TRS as the most
underfunded of the 127 pension systems it monitors, with less than
one-fourth of the resources needed to pay promised pensions. Several
years ago state officials closed the defined benefit program to new
teachers. A defined-contribution plan, much like a 401(k) retirement
program in private industry, was substituted. However, teachers were
given the opportunity earlier this year to vote on whether to kill the
defined-contribution plan and go back to a defined-benefit system. A
majority of those affected voted to go back to the defined benefit
system.
href='http://www.theintelligencer.net/editorials/articles.asp?articleID=5202'>Read
more