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August 5, 2008
July Consumer Bankruptcy Filings
Increase 48 Percent over Previous Year
U.S. consumer bankruptcy filings increased 48 percent nationwide in July
from the same period a year ago, according to the ABI, relying on data
from the National Bankruptcy Research Center (NBKRC). The overall July
consumer filing total of 94,124 also represented an increase of 13.7
percent from the 82,770 filings recorded in June. Chapter 13 filings
constituted 32.5 percent of all consumer cases in July, a slight
decrease from June. “The most recent uptick in bankruptcy filings
reflects growing stress on the household finances of U.S.
families,” said ABI Executive Director Samuel J.
Gerdano. “We expect bankruptcies to continue to
surge past 1 million new cases by year end.”
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 the July consumer filing charts.
Retailers
Boscov's Department Stores Seek
Bankruptcy Protection
Boscov's Inc., the 9,500-employee department-store chain founded in 1911
in Reading, Pa., filed for chapter 11 protection in Wilmington, Del.,
yesterday citing decreased consumer spending, Bloomberg news reported.
Boscov's said that it will immediately close 10 of its 49 stores and
borrow as much as $250 million from a group of lenders led by Bank of
America Corp. to help it restructure. Boscov's is seeking court approval
of auction procedures for the selection of a liquidation firm to assist
with store-closing sales. It is requesting an Aug. 12 auction. The
company said it will liquidate about $34 million in merchandise at the
sales to be commenced by Aug. 15.
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2fCiNWU8sI8'>Read
more.
Bankrupt Retail Chain Purchased by
Turnaround Firm
Bankrupt retailer Steve & Barry's LLC yesterday agreed to be
acquired by turnaround specialist Bay Harbour Management LC for $163
million, subject to court approval, the Wall Street Journal
reported today. Bay Harbour plans to operate the chain store as a going
concern, so long as a deal on renegotiated leases can be reached. The
ability of Steve & Barry's to stay in business will benefit mall
owners across the country, who paid up to hundreds of millions of
dollars to attract the stores into huge, empty spaces, often as large as
100,000 square feet. The Port Washington, N.Y.-based company filed
for chapter 11 protection last month blaming a liquidity squeeze for its
inability to raise rescue financing.
href='http://online.wsj.com/article_print/SB121787927432510951.html'>Read
more. (Subscription required.)
Florida Condo Developer Files for
Chapter 11 Protection
Florida condominium developer WCI Communities Inc. has filed for chapter
11 protection, dealing a blow to the company's chairman, the billionaire
financier Carl Icahn, the Wall Street Journal reported today.
Despite Mr. Icahn's efforts to gain influence on the board and improve
results, WCI succumbed to pressure from debt holders amid the
real-estate slump. WCI could not meet the demands from a group of
bondholders that they be paid $125 million in cash by Tuesday. WCI
offered to exchange their unsecured debt for secured notes, but the
bondholders rejected it. WCI also tried to arrange financing through an
investment bank to obtain needed cash, but it could not reach a
deal.
href='http://online.wsj.com/article/SB121785844374209979.html?mod=googlenews_wsj'>Read
more. (Subscription required.)
GM Will Take Part in Delphi's
Appaloosa Suit
General Motors Corp. won the right on Thursday to participate in Delphi
Corp.'s lawsuit against Appaloosa Management LP and other investors that
pulled out of a $2.55 billion investment deal with Delphi, derailing its
emergence from chapter 11 in April, Bankruptcy Law360 reported
yesterday. Bankruptcy Judge Robert D. Drain ruled that
because GM was a party to the restructuring and investment plan, it had
the right to read any and all business documents shared during pretrial
discovery and to be consulted if a settlement is reached. Along with the
right to appear at all trial proceedings, mediation sessions and
settlement negotiations, GM will have to comply with all confidentiality
restrictions, Judge Drain ruled.
href='http://bankruptcy.law360.com/articles/64886'>Read more.
(Subscription required.)
SemGroup Subsidiary Tries to Block
Financing Deal
SemGroup Energy Partners LP, a publicly traded affiliate of beleaguered
oil distributor SemGroup LP, moved to block its parent company's
bankruptcy financing by arguing that the proposed package offers the
subsidiary little protection, Bankruptcy Law360 reported
yesterday. In documents filed Friday in the U.S. Bankruptcy Court for
the District of Delaware, SemGroup Energy Partners objected to SemGroup
LP's motions for authorization to utilize pre-petition cash collateral
and $250 million in debtor-in-possession financing (DIP). In its
objection, SemGroup Energy Partners argued that its parent company
failed to provide adequate protection to any of the secured creditors
whose statutory liens are being primed by the cash collateral order and
DIP order.
href='http://bankruptcy.law360.com/articles/64888'>Read
more. (Subscription required.)
Greenspan Warns of More Bank
Bail-Outs
Alan Greenspan, the former chairman of the Federal Reserve, warned that
more banks and financial institutions could end up being bailed out by
governments before the credit crisis is over, the Financial
Times reported today. However, Greenspan cautioned that a
heavy-handed regulatory response to the crisis would do more harm than
good because it would depress global share prices. The former Fed
chairman says this financial crisis is a “once or twice a century
event deeply rooted in fears of insolvency of major financial
institutions.”
href='http://www.ft.com/cms/s/0/b59922bc-624f-11dd-9ff9-000077b07658.html'>Read
more.
Former Employees Say Freddie Mac CEO
Discarded Warning Signs
More than two dozen current and former high-ranking executives and
employees of Freddie Mac said that CEO Richard F. Syron rejected
internal warnings that could have protected the company from some of the
financial crises now engulfing the mortgage giant, the New York
Times reported today. Syron received a memo in 2004 from Freddie
Mac's chief risk officer, David A. Andrukonis, warning him that the firm
was financing questionable loans that threatened its financial health.
Syron refused to consider possibilities for reducing Freddie Mac's
risks, said Andrukonis. According to many executives, Syron was also
warned that the firm needed to expand its capital cushion and to slow
the firm's mortgage purchases, but this did not happen.
href='http://www.nytimes.com/2008/08/05/business/05freddie.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Six Flags Looks to Weather Financial
Stress
Six Flags, one of the nation's largest amusement-park companies, is
under serious financial strain as it hasn't posted an annual profit in
years and is weighed down by $2.4 billion of debt, the Wall Street
Journal reported today. While it posted a second-quarter profit of
$94.6 million, the company also faces a $288 million payment to
preferred stockholders next August. Six Flags' financial stress is
compounded by the current economic downturn as more American families
look to cut back their discretionary spending.
href='http://online.wsj.com/article_print/SB121785660178709927.html'>Read
more. (Subscription required.)
BAE Gets Contract to Manage
Bankruptcy Notices
A unit of BAE Systems' U.S. operations has received a contract from the
Administrative Office of the U.S. Courts to manage its bankruptcy notice
center, the Associated Press reported yesterday. While the terms of the
deal were not disclosed, BAE's information technology unit will manage
the mailing and electronic distribution of bankruptcy notices to inform
creditors nationwide when debtors file for bankruptcy. Work is scheduled
to begin on Oct. 1, and the one-year deal comes with nine one-year
options to extend. The company, which has been providing such services
to the court since 1994, will partner with RR Donnelley Co., Double
Envelope and Campbell-Ewald.