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October 1, 2002
Pitts Charges That Schumer Targeted Peaceful Protesters
Rep. Joe Pitts (R-Pa.) has charged that Sen. Chuck Schumer (D-N.Y.)
intended that the language of his amendment to the Bankruptcy Abuse
Prevention and Consumer Protection Act conference report was written to
target peaceful pro-life protestors. During a Senate Judiciary Committee
hearing on Wednesday, he said the Freedom of Access to Clinic Entrances
Act was written to keep pro-life activists from
protesting 'in a peaceful way.' 'This is the smoking gun,' said Rep.
Pitts. 'I've contended all along that Sen. Schumer was really out to
stop peaceful protests. Now he's said it himself. We need bankruptcy
reform. But not the kind that discriminates against people for what they
believe.' The lawmaker pointed out that during the Civil Rights
Movement, sit-in protestors were sometimes arrested and penalized as
many as 40 times. He said, 'The only difference here is that Senator
Schumer agrees with one group and not the other.' Pitts has been urging
the House leadership to not bring the conference report because of the
Schumer amendment.
Chapter 11 Creditors Can't Sue for Avoidance of Fraudulent
Transfers
The 3rd U.S. Circuit Court of Appeals invalidated a widely used
mechanism by which chapter 11 creditors could, with bankruptcy court
permission, sue to avoid fraudulent transfers, law.com reported.
In Cybergenics Corp. v. Chinery, 01-3805, decided Sept. 20, the
court affirmed a trial judge's finding that creditors are not proper
parties to bring avoidance claims under 11 U.S.C. 544(b). 'Based on the
plain statutory language and the Supreme Court's analysis in Hartford
Underwriters [Ins. Co. v. Union Planters Bank, 530 U.S. 1
(2000)], we hold that only a trustee or debtor-in-possession has the
power to invoke §544(b) to avoid fraudulent transfers, and that a
court may not authorize a creditor or creditors' committee to bring suit
under §544 derivatively,' wrote Judge Julio Fuentes, joined by
Judges Anthony Scirica and Samuel Alito Jr. To read the full article,
point your browser to
href='http://www.law.com/jsp/article.jsp?id=1032128635933'>http://www.law.com/jsp/article.jsp?id=1032128635933
United Airlines CEO to Meet with Union Leaders This Week
United Airlines Chief Executive Glenn Tilton has planned meetings this
week with top union leaders to review their proposal to cut $5 billion
from labor costs in an effort to keep the carrier out of bankruptcy, the
Associated Press reported. In his weekly message to employees, Tilton
still wasn't tipping his hand as to whether he thinks the unions'
proposal for concessions, $4 billion short of what United's management
had sought, would be enough. Tilton also said United was 'working hard'
to update its application to the government for a $1.8 billion federal
loan guarantee, reported the newswire. United, which hasn't made money
for 2 1/2 years, has been preparing for a possible chapter 11 bankruptcy
filing in case it can't make more than $1 billion in debt payments it
faces between mid-November and early next year. The carrier says it
needs the government loan guarantee in order to secure the necessary
financing.
Dutch UPC to File for Bankruptcy as Part of Restructuring
Deal
United Pan-Europe Communications (UPC), Europe's largest cable
television company, said Monday it will file for chapter 11 bankruptcy
protection as part of a deal to restructure its balance sheets, the
Associated Press reported. UPC, which is majority-owned by Denver-based
UnitedGlobalCom, has 10.7 billion euros ($10.6 billion) of debt and has
never posted a profit, the newswire reported. Under the deal announced
Monday, UPC bondholders will trade their notes for a 32.5 percent stake
in UPC after the restructuring. UnitedGlobalCom will get a 65.5 percent
stake in exchange for money UPC owes it. Other debtholders and common
shareholders will split the remaining 2 percent of UPC. In a statement,
UPC said it will file for bankruptcy both in the Netherlands and the
United States, where many of its bonds were issued. UPC expects to
complete the restructuring in the first quarter of 2003, the newswire
reported.
Metromedia International Defers Interest Payment on Senior
Notes
Metromedia International Group Inc. is deferring the $11.1 million
interest payment due Monday on its $210.6 million 10.5 percent senior
discount notes due 2007, Dow Jones reported. In a press release Monday,
the communications and media company said it is doing so to facilitate
potential restructuring. It had warned in May that cash flow and capital
resources weren't sufficient to make the interest payment. If Metromedia
doesn't make the interest payment on or before the expiration of the
30-day grace period, an 'event of default' under the indenture governing
these notes will occur. The company continues to negotiate with
representatives of senior discount notes holders to reach an agreement
on a restructuring of its debt in conjunction with proposed asset sales
and restructuring alternatives. Metromedia has warned it may have to
file for bankruptcy protection if it can't resolve liquidity
problems.
S. 2996 Would Limit Homestead Exemption
by Prof. G. Ray Warner, ABI Resident Scholar, Professor of Law at the
University of Missouri-Kansas City.
On September 24th, Senator Kohl (D-Wis.) introduced S. 2996, a
stand-alone bill that would cap homestead-related exemptions in
bankruptcy at $125,000 in the aggregate.
The bill titled the 'Bankruptcy Abuse Reform Act of 2002' would amend
section 522 to pre-empt higher state law exemptions in cases where the
debtor elected the state law exemption scheme or was required to use the
state law scheme because the relevant state had opted out of the section
522(d) federal exemption list. The $125,000 cap would apply to the
aggregate of all exemptions claimed in the case for real or personal
property used as a residence by the debtor or his/her dependants,
interests in a cooperative that owns property used as a residence by the
debtor or his/her dependants (a cooperative apartment), or a burial plot
for the debtor or his/her dependants. Like the pending Bankruptcy Abuse
Prevention and Consumer Protection Act of 2002, the cap would not apply
to an exemption claimed by a family farmer for his/her principal
residence. However, unlike the larger reform bill, this cap would be
absolute and would not provide exceptions for debtors who had lived in
the homestead for a lengthy period of time.
U.S. Supreme Court Nears Term Clogged with Business Cases
Companies trying to fend off asbestos lawsuits and consumers challenging
mortgage interest rate premiums are among those hoping their appeal to
the U.S. Supreme Court is granted as the 2002-2003 term draws near, Dow
Jones reported. Two important appeals rising out of a wave of asbestos
litigation centered in West Virginia have made their way to the Supreme
Court. The first, Norfolk & Western v. Ayers, No. 01-963, has
already been accepted by the court; it is being closely watched by
business interests concerned about novel trial bar arguments, reported
the newswire. In the case, a West Virginia jury awarded six Norfolk
Southern Corp. railroad workers $5.8 million under a decades-old Federal
Employers' Liability Act to compensate them for fear of contracting
cancer due to exposure to asbestos. Although the federal law in question
deals narrowly with railroad employment, Stephen Kinnaird of Sidley
Austin Brown & Wood said the case could have broader implications
because it offers 'one of the rare opportunities for the court to make
pronouncements on tort law.'
The other West Virginia asbestos case involves a number of large
companies that are fighting a class-action suit still making its way
through the state's court system. In that case, Mobil Corp. v. Adkins,
No. 02-132, the companies have asked the high court to intervene in
ongoing state court proceedings and rule on whether the consolidation of
thousands of asbestos claims was done properly, Dow Jones reported.
Chief Justice William Rehnquist denied an emergency petition by the
companies earlier in September. Originally involving 250 companies and
8,000 claims, recent settlements have reduced the numbers to a couple
dozen companies, including Exxon Mobil Corp., and about 5,000
claims.
Napster Creditors' Committee, Song Publishers Sue Bertelsmann
Napster Inc.'s official committee of unsecured creditors and a group of
music publishers on Friday filed a lawsuit against Bertelsmann that
challenges the validity of Bertelsmann's claims against Napster's
chapter 11 estate, Dow Jones reported. The plaintiffs argue that
Bertelsmann shouldn't be repaid amounts owing under $120 million in
loans it made to Napster before Napster filed for bankruptcy. They also
argue that Bertelsmann can be repaid for $3 million owed under a loan it
made after Napster filed for bankruptcy, but other creditors should get
paid first. The lawsuit was filed in the U.S. Bankruptcy Court in
Wilmington, Del., as an adversary proceeding to Napster's chapter 11
case. A hearing to consider the matter hasn't been scheduled. Napster
filed for chapter 11 bankruptcy protection on June 3, listing assets of
$7.9 million and liabilities of $101 million as of April 30.
Court OKs Rules for Metromedia Fiber $47.5 Million Property
Sale
A bankruptcy court has approved competitive bid procedures that
Metromedia Fiber Network Inc. will use to solicit higher bids for its
property in Reston, Va., Dow Jones reported. The court also approved an
agreement that allows the fiber-optic network builder to reject certain
capacity purchase agreements with units of Global Crossing Ltd.,
according to a second order signed by Judge Adlai S. Hardin Jr.
of the U.S. Bankruptcy Court in White Plains, N.Y. In a third order,
Judge Hardin extended the period during which only Metromedia can
propose a reorganization plan through Jan. 15, 2003, from Sept. 17. The
company, which has been operating under chapter 11 since May, has said
that to become cash-flow positive it would seek to substantially reduce
its debt, dispose of unproductive properties and reject burdensome
vendor contracts.
Borden Chemicals and Plastics Wins Approval of Insurance
Settlement
Borden Chemicals & Plastics Operating L.P. won court approval of a
settlement with its insurance company that allows the debtor to satisfy
all amounts owed by paying its premium, Dow Jones reported. The order
signed by Chief Judge Peter J. Walsh of the U.S. Bankruptcy Court
in Wilmington authorizes Borden Chemicals & Plastics Operating to
pay American International Group Inc. roughly $1.53 million to buy out
of its insurance plan. The deal allows the debtor to cease securing
potential liabilities with a $2.5 million letter of credit from Fleet
National Bank. Borden Chemicals & Plastics Operating is 99 percent
owned by Borden Chemicals & Plastics L.P., which didn't file for
chapter 11 bankruptcy protection.
W.R. Grace Seeks Court OK to Amend CEO Pact, Extend Bonus
W.R. Grace & Co. has asked the court handling its chapter 11 case
for authority to amend its employment agreement with Chairman and Chief
Executive Paul Norris, Dow Jones reported. The amended agreement
entitles Norris to receive a retention bonus equal to 130 percent of
base salary at the end of 2003 and 2004, the newswire reported. The
parties' original contract provided for a retention bonus for 2001 and
2002, but not 2003 or later. Norris's retention bonus will be $1 million
for 2002 and $1.2 million for 2003, according to court papers. Norris's
base salary under the original contract is not less than $875,000. A
hearing on the amended agreement is scheduled for Oct. 28 before U.S.
Bankruptcy Judge Judith K. Fitzgerald. Judge Fitzgerald recently
extended the period in which the company holds the exclusive right to
file a chapter 11 reorganization plan in its case through Feb. 1, 2003.
The period had been scheduled to expire Aug. 1.
President Casinos Unit Plans November Emergence from
Bankruptcy
Biloxi, Miss.-based President Casinos Inc.'s Broadwater Hotel plans to
emerge from bankruptcy in November, according to the St. Louis
Business Journal. The company said its subsidiary, President
Broadwater Hotel, has agreed in principle to certain terms of a
consensual plan of reorganization, the online newspaper reported. The
subsidiary owns the President Broadwater Resort Property in Biloxi,
along with the adjoining golf course and the marina in which the company
operates the President Casino in Biloxi. John Aylsworth, president and
chief operating officer, said with the anticipated November
implementation of the plan, the company could focus on its overall plan
to restructure all of the company's obligations. St. Louis-based
President Casinos Inc. owns and operates dockside gaming facilities in
Biloxi and St. Louis. The company filed for bankruptcy in June.
Century/ML Cable Venture Files Petition for Chapter 11
Bankruptcy
Adelphia Communications Corp.'s Century/ML Cable venture filed for
chapter 11 bankruptcy protection in New York on Monday, with enough
resources to carry on day-to-day operations, Dow Jones reported. New
York-based Century/ML Cable holds the cable television franchise in
Levittown, Puerto Rico. Adelphia's other Puerto Rican operation,
Century-ML Cable Corp., won't be affected by the bankruptcy filing.
Adelphia and its Century Communications Corp. unit, which holds a 50
percent interest in Century/ML Cable, are in litigation with the other
venture partner, ML Media Partners L.P. 'After carefully considering all
of our options, we concluded that chapter 11 protection would protect
our creditors and allow for an orderly resolution of the litigation-
related issues facing the joint venture while enabling us to continue to
provide quality service to our 15,000 customers,' said Century
Communications Vice President and Treasurer Chris Dunstan, the newswire
reported. 'The business is fundamentally sound and substantially current
on its obligations to its vendors, and we expect to emerge from the
proceedings fully able to maintain operations going forward.'
Agway Inc. Intends to File for Chapter 11 Bankruptcy
Agway Inc. announced plans on Monday to file for chapter 11 bankruptcy
reorganization in an effort to keep its businesses operating while it
tries to manage its debt, Dow Jones reported. The company said it would
file reorganization petitions also for subsidiaries including Agway Feed
and Nutrition, Agway Agronomy, Seedway, Feed Commodities International,
Country Best Produce, CPG Nutrients, Agway CPG Technologies and Agway
General Agency on Tuesday in the U.S. Bankruptcy Court in Utica,
N.Y.
Agway said it would seek immediate court approval to keep paying wages
and benefits to some 3,600 employees, most in the greater Syracuse, N.Y.
area. While it continues trying to sell Telmark, Agronomy and Seedway
subsidiaries as announced in March, no major layoffs were planned. The
company lost $98.2 million in the fiscal year ending June 30, saying
$85.4 million were directly related to the sale of discontinued
operations, on sales of $899 million. The company said it has lined up
$125 million in secured financing from institutions including GE
Commercial Finance.
Patriot Air Files for Bankruptcy Just 11 Months after
Launch
Eleven months after Patriot Air roared into business, the Dallas-based
charter airline that was considered a 'very risky' venture by its
investors has filed for chapter 11 bankruptcy reorganization, the Dallas
Business Journal reported. The investors voluntarily filed the petition
on Sept. 18 in U.S. Bankruptcy Court, Northern District of Texas, the
online newspaper reported. The suit lists more than 90 creditors, with
$4.47 million owed to the top 20 unsecured creditors. That list includes
Pace Airlines, Winston Salem, N.C., which was hired to operate Patriot's
leased Boeing 737 airplanes. Pace is owed $2.4 million. Also, San
Francisco-based Triton Aviation Services Ltd. is owed $1.65 million for
aircraft leases.
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