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March 15, 2006
name='1'>Bankruptcies Soar in FY2005 as New Federal Law Goes in
Effect
w:st='on'>
size='3'>U.S.
size='3'>bankruptcy filings rose 10 percent in fiscal year 2005 to a
record 1.78 million, driven in part by a more restrictive law that went
into effect in October, according to a federal report, Bloomberg News
reported yesterday. About 542,000 filings were made in the third
quarter, the most ever in one quarter, according to the report by the
Administrative Office of the U.S. Courts. 'The new law makes it more
expensive and difficult for people to file for bankruptcy,' said
Lynn M. LoPucki,
a UCLA School of Law professor and an expert in
bankruptcy issues. 'But ultimately, the number of bankruptcies is
determined by debt levels, and consumer debt is at an all-time high.'
Judge Thomas
Hogan, chairman of the U.S. Judicial
Conference's executive board, said federal courts around the country had
devoted extra staffing to handle the influx of cases. Personal
bankruptcies rose along with consumer debt and the change in the law,
said
size='3'>Sam Gerdano
executive director of the Alexandria, Va.-based American Bankruptcy
Institute. A 2 percent drop in business bankruptcies for the year can be
explained by low interest rates and the healthy economy, he said. 'The
reason why bankruptcy filings can go up during an otherwise healthy
economy is because they are driven by household debt. Personal
bankruptcies accounted for about 98 percent of the filings and they are
almost always driven by consumer debt,' Gerdano said.
href='http://www.latimes.com/business/la-fi-bankruptcy15mar15,1,1006399,print…'>Read
more.
name='2'>Congressional Conference on Pension Legislation Off to Slow
Start
Conference negotiations
to resolve differences over House and Senate versions of pension
legislation are off to a slow start, with lawmakers facing a long list
of contentious issues that staffers have not been able to
resolve,
size='3'>CongressDaily reported today. Over
the weekend, staffers compiled the list of issues for members to address
in their meetings, scheduled to begin this week. But the number of
unresolved items appears to be growing, said Senate Finance ranking
member Max Baucus (D-Mont.) a conferee. No provision has yet emerged as
a particular roadblock, lobbyists and members said, but staff
negotiations yielded little headway. 'We're telling staff to clear out a
lot of this underbrush,' Baucus said. 'Time is precious.' A meeting of
negotiators planned for Tuesday evening was canceled and some conferees
are already worried that they will not meet the timetable that Senate
Health, Education, Labor and Pensions Chairman Enzi set for the
conference. Enzi, who is heading the conference, wanted to wrap up its
work by March 31, in preparation for final passage of a conference
report by April 7, when Congress breaks for a two-week recess. Sen.
Johnny Isakson (R-Ga.) said he worries that Congress might recess before
readying legislation in time for companies to meet an April 15 deadline
for making their first pension payments of the year. 'If we haven't
dealt with it by then, we'll have dumped millions on the PBGC,' he said,
referring to the Pension Benefit Guaranty Corp., the nation's pension
insurer.
name='3'>Bankruptcy Judge Says Refco Unit Should
Liquidate
A U.S. federal bankruptcy
court judge said on Tuesday that Refco's offshore broker-dealer unit
should liquidate its assets separately from the rest of the company, but
gave creditors and the company time to start working out a plan for
doing so, Reuters reported yesterday. U.S. Bankruptcy Judge
Robert Drain
size='3'>also ordered the appointment of a trustee to oversee the
liquidation of the Refco Capital Markets unit. 'I don't think this
ruling presents any problems. Pressure for everyone to act quickly is
good,' Refco chief executive Harrison Goldin told Reuters after the
ruling. A group of the creditors sought to regain their assets by
converting the Refco Capital Markets bankruptcy into a 'stockbroker
liquidation' under chapter 7. Judge Drain said a stockbroker liquidation
is meant to protect customers of a stockbroker, and that Congress
clearly intended to do so. Lawyers for New York-based Refco and the
unsecured creditors' committee said such a liquidation would unfairly
favor a small group of customers. Judge Drain said that his preliminary
ruling on the stockbroker liquidation will not take effect for at least
45 days, which is not enough time to negotiate a plan but is enough time
to confirm that necessary steps are being taken.
href='http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&s…'>Read
more.
name='4'>Schlotsky’s Bankruptcy Remains in Chapter
11
The two motions to
convert the Schlotsky’s Deli bankruptcy petition to a chapter 7
case have been rendered moot after a judge approved a liquidation plan
under the company's chapter 11 filing,
size='3'>Portfolio Media reported yesterday.
A
size='3'>Texas
judge gave the green light to a liquidation plan that would defer
payments to professionals while the company divests itself of its
assets. The deli is liquidating as SI Restructuring Inc.
The judge’s ruling nullifies
two motions, one filed by former executives and one filed by independent
creditors, to convert the company’s bankruptcy proceedings to
chapter 7. In
January, two former executives of the franchise asked a bankruptcy court
judge to convert the company’s bankruptcy proceedings from chapter
11 to chapter 7, claiming attorney and creditor fees are draining the
company’s already dry coffers. The case is
face='Times New Roman' size='3'>SI Restructuring Inc
size='3'>. and SRE Restructuring Inc., chapter 11 petition number
04-54504-lmc.
name='5'>Bankruptcy Court Rejects Five Rivers Electronics Proposal
to Move
Five Rivers Electronic
Innovations LLC, the Greeneville, Tenn., manufacturer that is under
chapter 11 bankruptcy protection, had its plan to relocate its
operations rejected by the U.S. Bankruptcy Court, the
face='Times New Roman' size='3'>Greeneville Sun
size='3'>reported yesterday. Judge Marcia Parsons said
that on balance, she “could see no immediate benefit” to the
former TV-maker moving to a smaller facility. Rather, Judge Parsons
said, Five Rivers needs to have its bankruptcy reorganization plan
approved by the court before going ahead with its planned move for what
will be a much smaller company. Five Rivers and its predecessor here,
Philips Consumer Electronics Co., once were among Greeneville’s
largest employers. The next scheduled Five Rivers hearing before the
bankruptcy court is April 18.
href='http://www.greene.xtn.net/index.php?table=news&template=news.view.subsc…'>Read
more.
Icahn,
size='3'>Creditors
Square
Fees
Creditors and executives
of bankrupt GB Holdings Inc. continue to squabble over how to pay legal
fees incurred in the case, with creditors telling a bankruptcy court
that GB Holdings financier Carl Icahn should pay the defense costs of
company executives embroiled in a shareholder lawsuit,
face='Times New Roman' size='3'>Portfolio Media
size='3'>reported yesterday. The creditors’ committee in the
ongoing bankruptcy proceedings protested an earlier request by
executives to tap into insurance money to fund their defense. The
creditors claim that the insurance policies are part of the bankruptcy
estate and that the request to use them is unfair. “The directors
are seeking—once again—to saddle the estate with a liability
that should be borne by an Icahn affiliate,” the creditors said in
court documents. “The obvious implication is that the directors
are looking to protect the interests of Icahn and his affiliates.”
The bankruptcy case is GB Holdings Inc., chapter 11 petition
number 05-42736-JHW, in the U.S. Bankruptcy Court for the District of
New Jersey.
Auto
Supplier Lear Tries to Dispel Fears of Bankruptcy
With the recent onslaught
of bankruptcy protection filings from competing auto suppliers Collins
& Aikman Corp., Delphi Corp. and Dana Corp., Lear Corp. CEO Bob
Rossiter sent a letter to employees Tuesday to answer questions and calm
fears about whether the company would file for bankruptcy, the
Detroit Free Press
reported today. Bloomberg reported Tuesday that Lear will
scrap its dividend in May to save money as carmakers reduce demand and
materials prices remain high. Dropping the 25-cents-a-share quarterly
dividend would save Lear about $70 million a year. The supplier is
reducing expenses after a $1.38-billion loss last year, in part because
of prices for materials, including steel. Detroit-based automakers such
as Ford Motor Co. and General Motors Corp., which account for more than
half of Lear's sales, also have been cutting production. In his letter
Tuesday, Rossiter acknowledged the hurdle he has in selling Lear's
'depressed' interiors business. In October, Lear entered into a
framework agreement with Ross and Franklin Mutual Advisers. If the deal
goes through, Lear will hold a noncontrolling interest in a joint
venture to purchase Collins & Aikman. The deal would include all of
the Lear's interiors business, except for seating and electronics.
href='http://www.freep.com/apps/pbcs.dll/article?AID=/20060315/BUSINESS01/603…'>Read
more.
href='http://www.freep.com/apps/pbcs.dll/article?AID=/20060315/BUSINESS01/603…'>
Airlines
w:st='on'>
name='8'>U.S.
face='Times New Roman' size='3'> Investigates Pension Fund at
Northwest Air
The Labor Department is
investigating whether Northwest Airlines systematically shortchanged its
employee pension fund over three years, then avoided having to make a
$65 million payment to the fund by filing for bankruptcy protection just
one day before the payment was due, the
size='3'>New York Times reported today. The
government has subpoenaed voluminous and detailed information from
Northwest going back to January 2002, when both the airline and its
pension fund faced severe financial pressures after the terrorist
attacks of 2001 and the bursting of the technology bubble in the stock
market. The investigators appear to be tracing the steps that led to the
pension fund's recent shortfall of $5.8 billion, and whether Northwest
violated any laws. It suggests that the Labor Department is looking for
a way to break an entrenched pattern, in which distressed companies
quietly deplete their pension funds over a number of years, then declare
bankruptcy and transfer huge obligations to the federal government. The
subpoena was served in January. The IRS declined yesterday to say
whether it was working with the Labor Department on the Northwest
investigation. But Joseph H. Grant, an agency official, said it was
'working in close cooperation with the other federal agencies that
oversee pension plan operations.' Northwest's pension fund consists of
three individual plans for about 8,000 pilots, 9,000 salaried employees
and 52,000 unionized workers, including mechanics and agents. At the end
of 2004, the plans owed a total of $9.2 billion to their participants,
but had assets of $5.4 billion.
href='http://www.nytimes.com/2006/03/15/business/15pension.html?_r=1&oref=slo…'>Read
more.
In related news, a federal
bankruptcy judge has stayed a long-standing antitrust class action
lawsuit brought against the struggling carrier, unconvinced
face='Times New Roman'>that the litigation merits the
disruption of Northwest’s ongoing reorganization efforts,
Portfolio Media
reported yesterday. On Friday, U.S. Bankruptcy
Judge Allan
Gropper ruled that the class of plaintiffs had
not provided enough evidence to persuade him that
face='Times New Roman' size='3'>Northwest’s bankruptcy case should
be interrupted to address the suit’s charges. The suit, currently
stalled in the U.S. District Court of Detroit, accuses Northwest, Delta
Air Lines Inc. and US Airways Group Inc. of price fixing by eliminating
the practice of “hidden-city ticketing.” Last December, a
group of plaintiffs requested that the antitrust lawsuit, which has
lingered for almost a decade, be allowed to proceed. But Judge Gropper,
in his recent decision, rejected plaintiffs’ argument that the
lawsuit concerned issues of public safety, asserting that the class
would not be injured by waiting until the bankruptcy case is resolved.
Judge Gropper concluded that allowing the lawsuit to proceed would not
only interfere with reorganization efforts but would also prejudice the
interest of other creditors in the case.
name='9'>Delta in Talks to Amend Bankruptcy
Financing
Delta Air Lines Inc. said it is
in talks with lenders to amend its $1.9 billion in bankruptcy financing,
hoping to pay less in interest and save money as it restructures,
Reuters reported yesterday. The No. 3 airline said it has initiated
negotiations with the lead credit agent, General Electric Co.'s
commercial finance unit, about rate changes in its debtor-in-possession
(DIP) loans and about possibly amending other financing agreements.
Delta said the market value of three DIP loans totaling $1.9 billion has
gone up since being approved shortly after the company sought chapter 11
protection last fall and would like its lenders to give it a break on
interest. This is the first time Delta has sought to change terms of its
bankruptcy financing. Edward Bastian, the company's chief financial
officer, said Delta has little or no margin for error in its plan that
includes $1.9 billion in cost cuts and $1.1 billion in revenue and
productivity enhancements.
href='http://news.yahoo.com/s/nm/20060315/bs_nm/airlines_delta_dc_8'>Read
more.
name='10'>California City Reaches Bank Repayment Deal
The city of
size='3'>Gardena
w:st='on'>
size='3'>Calif.
tentative agreement Tuesday with two banks to refinance about $18
million in unpaid debt tied largely to a disastrous insurance venture,
staving off the possibility of bankruptcy or default at City Hall,
officials said, the Associated Press reported yesterday. The agreement
in principle with Japanese-owned Sumitomo Trust & Banking Co., which
holds most of the debt, and Union Bank of
w:st='on'>
size='3'>California
industrial city south of
w:st='on'>Los
Angeles
percent of $25.5 million in outstanding obligations, Mayor Paul Tanaka
said. Gardena was saddled with the huge bill — equal to about
three-quarters of its annual budget — after the collapse of the
Municipal Mutual Insurance Co., which the city created, and the failure
of a city-backed home-loan program. Under the deal,
w:st='on'>
size='3'>Gardena
refinance about $18 million in debt, at which time the city also will
make a $1 million cash payment to the banks. In addition,
size='3'>Gardena
make another $2.6 million payment at the end of the year, the mayor
said. Read more.
href='http://news.yahoo.com/s/ap/20060315/ap_on_re_us/city_on_the_edge_1&prin…-'>
id='11' name='11'>Credit Bureaus Join to Remake
Scoring
The nation's three
largest credit bureaus yesterday unveiled a new credit scoring system
that they say will make it easier for lenders to determine a borrower's
credit risk and for consumers to more accurately gauge their financial
health, the Washington
Post reported today. In a rare cooperative
venture, Equifax Inc., Experian Information Solutions Inc. and
TransUnion LLC designed the new system, called VantageScore, to simplify
the credit-application process by providing an easy-to-understand,
consistent score among the three firms. They say the score will better
predict whether a consumer will make timely payments over the life of a
loan. VantageScore will compete with FICO, the scoring system created by
Fair Isaac Corp. and used in about 75 percent of all mortgage
applications. It will use a different set of calculations to produce
scores, ranging from 501 to 990; the FICO scale goes from 300 to 850.
Although the credit bureaus are starting to sell VantageScore to
lenders, the new scores won't be available to consumers for at least
several weeks.
href='http://www.washingtonpost.com/wp-dyn/content/article/2006/03/14/AR20060…'>Read
more.
International
w:st='on'>
name='12'>U.K.
face='Times New Roman' size='3'> Should Compensate Some Pension
Savers, Ombudsman Says
The
w:st='on'>
w:st='on'>U.K.
compensate some members of pension funds that were wound up without the
assets to pay what they'd promised retirees, according to the
Parliamentary Ombudsman, Bloomberg News reported today. The government
should also consider making 'consolatory'' payments to those members,
according to the report from the body, which carries out independent
investigations for the U.K. Information from government bodies charged
with looking after the pension policy was 'inaccurate, incomplete,
unclear and inconsistent,'' Ombudsman Ann Abraham said in the
report. The
w:st='on'>U.K.
some measures to protect pension savers. The Pension Protection Fund was
set up to pay shortfalls when a fund isn't able to pay retirees after
its sponsoring company goes out of businesses. Charges are spread across
all
face='Times New Roman'
size='3'>U.K.
size='3'>private sector so-called defined benefit funds.
href='http://www.bloomberg.com/apps/news?pid=10000102&sid=aXCC3euBSeiU&refer=…'>Read
more.
name='13'>Pension Deficit Forces British Manufacturer into
Insolvency
Pension fund trustees at the
manufacturing group Armstrong pushed their company into receivership
yesterday, sacrificing employees' jobs to gain greater security over
their pension savings, the London Independent reported today.
The unprecedented move was forced on Armstrong after the trustees
discovered the only way that to secure financial help from the
Government's Financial Assistance Scheme (FAS) was to push the employer
into insolvency. In a statement yesterday, Armstrong said it had done
everything it could to avoid going into receivership, including offering
to make a lump-sum payment equivalent to the benefits that would be paid
out from the FAS. However, the pension scheme trustees rejected the
company's offers, opting for the security of FAS help. Angad Paul, the
chief executive of Caparo Group, which owns Armstrong, said, 'This is a
bizarre world when a pension fund can access government subsidy only by
closing down a successful firm and damaging its suppliers. This could
not have been the intention behind the FAS.”
href='http://news.independent.co.uk/business/news/article351392.ece'>Read
more.