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June 19, 2009
Supreme Court Rules on
Asbestos Claims in
face='Times New Roman' size='3'>Travelers
size='3'>Case
Cautioning that its decision should be construed as
narrowly focused, the U.S. Supreme Court ruled yesterday that an
injunction against lawsuits in the landmark bankruptcy case of asbestos
product manufacturer Johns-Manville Corp. bars claims later asserted by
asbestos plaintiffs against the company’s insurer, Travelers
Indemnity Co.,
size='3'>Bankruptcy Law360 reported yesterday.
In a 7-2 decision, the Supreme Court reversed an opinion by the U.S.
Court of Appeals for the Second Circuit and remanded the case, ruling
that a bankruptcy judge properly interpreted the 1986 injunction in an
order issued in 2004 to apply to the later claims.“We hold that
the terms of the injunction bar the actions and that the finality of the
bankruptcy court’s orders following the conclusion of direct
review generally stands in the way of challenging the enforceability of
the injunction,” Justice David Souter said for the majority. In a
dissenting opinion, however, Justices John Paul Stevens and Ruth Bader
Ginsburg sided with the Second Circuit, holding that the bankruptcy
court overstepped its jurisdiction by barring the suits, which were
filed directly against Travelers and alleged that the insurer wrongfully
acted to conceal the health effects of asbestos.The high court noted in
a preface to the opinion that the majority holding was narrowly
construed and did not resolve whether a bankruptcy court can enjoin
claims against insurers that are not derivative of a debtor’s
action, nor did it address whether any particular party in the dispute
is bound by the bankruptcy court’s 1986 order — a question
the Second Circuit did not consider.
href='http://www.supremecourtus.gov/opinions/08pdf/08-295.pdf'>Click
here to read the ruling.
Autos
name='2'>“Cash-for-Clunkers” Bill Passes in Bid to
Revive Car Sales
The Senate approved a $1 billion program yesterday to
give vouchers to consumers who trade in their gas-guzzling clunkers for
more fuel-efficient models -- a move that dealers hope will revive
slumping auto sales, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. Congressional leaders attached the legislation
to a $106 billion spending bill to fund troops in Iraq and Afghanistan.
The spending bill passed by a 91-5 vote but not before some Republican
lawmakers unsuccessfully sought to strip the measure from the bill.
Dealers, unions, trade groups and automakers have been lobbying for
months for the legislation in hopes that it would stop the streak of
dismal U.S. auto sales. The auto sales program, which offers vouchers of
up to $4,500, now moves to the White House for the president's
signature.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/18/AR2009061804060_pf.html'>Read
more.
GM Hopes to Beat
Predictions with Speedy Bankruptcy Exit
General Motors Corp. executives and advisers are
hoping to exit bankruptcy court with the formation of a new company as
early as mid-July, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. GM executives and Obama administration
officials involved in the planning have said GM's bankruptcy would take
longer than Chrysler LLC's, which ended earlier this month when the auto
maker emerged after little more than 30 days in court. GM's bankruptcy
architects have given a wider range for the process, including recent
projections of 60 to 90 days. The automaker's emergence from chapter 11,
however, still faces hurdles, including potential challenges to its
reorganization plan. A bankruptcy judge will hold a hearing on June 30
on a proposed sale of the company's assets under a §363 sale.
Though a small majority of bondholders have agreed not to fight GM's
sale in court, a large faction remains opposed to the company's proposed
debt exchange to erase $27 billion in unsecured liabilities from its
books for cents on the dollar.
href='http://online.wsj.com/article/SB124538077409730297.html#mod=testMod'>Read
more. (Subscription required.)
In related news, General Motors received bankruptcy
court approval yesterday to terminate leases for all seven of its
corporate aircraft, plus a hangar at a Detroit airport, the
face='Times New Roman'>
size='3'>Washington Post reported today.
Chrysler also recently terminated its two aircraft leases. A spokesman
for Ford, the only one of the Big Three Detroit automakers that has not
taken taxpayer funds, said the company is seeking to sell its five jets,
which have been grounded since late last year.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/18/AR2009061803795_pf.html'>Read
more.
A Credit Squeeze for Small
Business Owners
A crackdown on credit limits by card companies is
squeezing the nation’s 27 million small businesses, exacerbating
the problems brought on by a stagnant economy, the
face='Times New Roman'>New York
Times reported today. As of April, 59 percent
of America’s small firms relied on credit cards to help finance
their day-to-day operations, up from 44 percent at the end of last year,
according to the National Small Business Association. The number of
small-business owners who depend on a credit card to buy items as varied
as paper clips and heavy equipment has climbed steadily over the years,
from just 16 percent in 1993. Today, that group makes up 11 percent of
the revenue for Visa and MasterCard, from 3 percent in 1998, according
to David Robertson, who publishes The Nilson Report on the credit card
industry. However, credit card terms have worsened sharply with the
recession: three-quarters of small business said they have seen a large
cut in limits over the last six months.
href='http://www.nytimes.com/2009/06/19/business/smallbusiness/19credit.html?_r=1&ref=business&pagewanted=print'>Read
more.
Corporate Lenders Stung by
Financial Regulatory Overhaul Proposal
One proposal being pushed by the White House takes aim
at industrial loan companies (ILC), which are allowed under their
state-issued charters to collect federally insured deposits, offer
credit cards, make loans and process financial transactions without
facing as much scrutiny as traditional banks regulated by the U.S.
government, the
size='3'>Wall Street Journal reported today.
President Barack Obama wants companies with ILC charters to register as
bank-holding companies with the Federal Reserve. That would put them in
the same regulatory category as Bank of America Corp. and JPMorgan Chase
& Co., subjecting the non-banks to much greater government
oversight. As of last month, there were 45 ILCs with combined assets of
$232.3 billion, according to the Federal Deposit Insurance Corp. That is
equivalent in size to the 11th-largest U.S. bank, or slightly smaller
than regional bank U.S. Bancorp.
href='http://online.wsj.com/article/SB124536885417929459.html#mod=testMod'>Read
more. (Subscription required.)
In related news, House Financial Services Committee
Chairman Barney Frank (D-Mass.) said that the House will wait until
after the August recess to consider legislation to revamp the nation's
financial regulatory system,
face='Times






New
Roman'
size='3'>CongressDaily reported today. Frank
has slotted six days for hearings on regulatory
restructuring throughout July. Senate Banking Chairman Christopher
Dodd (D-Conn.) said he would not move his companion bill dealing with
the financial regulatory overhaul until the fall as he fills in for
Health, Education, Labor and Pensions Chairman Edward Kennedy on health
care negotiations. President Obama wants the measure to pass by year's
end.
Minneapolis Star
Tribune Plans to Emerge from Chapter
11
The
face='Times New Roman' size='3'>Minneapolis Star Tribune
said yesterday it had filed a plan to emerge from chapter
11 protection by fall, Reuters reported yesterday. The paper said it has
the approval of creditors who hold about $384 million in secured debt
and $96 million in unsecured obligations. Under the proposed plan, the
paper said it would emerge from chapter 11 with $100 million in debt and
would be worth $118 million to $144 million, including the value of its
real estate. The paper said first-lien creditors would receive new
common stock and secured notes with a value of 32 cents on the dollar
and would own the company upon approval of the plan. Unsecured creditors
would receive a cash distribution or new common stock and warrants in
the newly reorganized company, according to the paper. A hearing on the
plan is scheduled for July 29.
href='http://www.reuters.com/article/bondsNews/idUSLJ39947220090619'>Read
more.
Court Approves Cross-border
Protocol for Lehman
Administrators overseeing Lehman Brothers Holdings
Inc.'s global bankruptcy proceedings have won court approval to
establish a cross-border insolvency protocol that would allow them to
coordinate foreign proceedings in an effort to speed up the
restructuring process,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Bankruptcy Judge
face='Times New Roman'>James M.
Peck approved the multilateral agreement on
Wednesday, paving the way for administrators in at least six countries
to hash out consistent resolutions to problems that they share.
Administrators and trustees in Germany, Australia, Hong Kong, Singapore,
the Netherlands and U.S. have signed the Lehman Protocol, aiming to
create a framework to 'minimize the costs and maximize the recoveries'
of Lehman's creditors across multiple jurisdictions.
href='http://bankruptcy.law360.com/articles/107073'>Read
more. (Subscription required.)
Justices Reject Ruling on
Retrial of Enron Executive
The Supreme Court sided yesterday with a former
executive at the one-time energy giant Enron in a ruling that makes it
unlikely he can be tried a second time on charges related to financial
fraud, the Associated Press reported yesterday. The court, in a 6-3
vote, threw out an appeals court ruling that would have allowed the
retrial of F. Scott Yeager, a former executive at Enron’s failed
broadband venture, on charges for which a jury could not reach a verdict
at his first trial. However, Justice John Paul Stevens, writing for the
majority, did not completely shut the door to another trial. In his
first trial in 2005, Yeager faced 125 counts and was acquitted of five,
including four counts of wire fraud and one of conspiracy to commit wire
and securities fraud. The jury could not reach a verdict on the
remaining counts, which included insider trading and money laundering.
Yeager was later re-indicted on 13 counts of insider trading and money
laundering.
href='http://www.nytimes.com/2009/06/19/business/19bizcourt.html?ref=business&pagewanted=print'>Read
more.
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