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April 14, 2009
size='3'>Bankruptcies Surge Despite
BAPCPA’s Requirements
The number of U.S.
businesses and individuals declaring bankruptcy is increasing amid the
recession, despite BAPCPA’s intent to make it more difficult for
Americans to escape their debts, the Associated Press reported
yesterday. Nearly 1.2 million debtors filed for bankruptcy in the past
12 months, according to federal court records collected and analyzed by
the AP. Last month, 130,831 sought bankruptcy protection — an
increase of 46 percent over March 2008 and 81 percent over the same
month in 2007. Bob
Lawless, a professor at the University of
Illinois College of Law, said that bankruptcies could reach 1.5 million
this year and level off at 1.6 million next year — around the same
time economists expect an economic recovery to begin.
href='http://www.google.com/hostednews/ap/article/ALeqM5ikymwYIOopCKgNCXplo_p58i7QAQD97HQAB80'>Read
more.
U.S. Trustee Objects to
Deloitte's Role in Primus’ Chapter 11 Case
Acting U.S. Trustee
face='Times
New
Roman' size='3'>Roberta A. DeAngelis on
Thursday objected to bankrupt global phone and Internet service provider
Primus Telecommunications Group Inc.’s retention of Deloitte &
Touche LLP,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. In her objection filed in the U.S.
Bankruptcy Court for the District of Delaware, DeAngelis argued against
pre-approval of Deloitte's auditing and accounting services, for which
it will charge up to $375,000 per month capped at $1 million, and said
that the firm may have conflicts of interest in the chapter 11
proceedings. Deloitte provided various auditing and accounting services
for the debtors prior to their chapter 11 filing on March 16, and the
debtors had asked the court for permission to continue to employ
Deloitte in the ordinary course of its business, according to court
documents.
href='http://bankruptcy.law360.com/articles/96446'>Read
more. (Subscription required.)
New York Pension Deals Seen
as Focus of Wide Inquiry
New York State prosecutors and the Securities and
Exchange Commission are investigating whether the Carlyle Group, one of
the nation’s largest and most politically connected private equity
firms, made millions of dollars in improper payments to intermediaries
in exchange for investments from New York’s state pension fund,
the
size='3'>New York Times reported today. The
inquiry, which is examining the activities of a number of investment
companies, focuses on what has been a widespread practice among hedge
funds and private equity firms — paying so-called placement agents
to gain business managing the pension funds run by states for public
employees. Such payments often raise questions about conflicts of
interest and concerns that they lead placement agents to bribe public
officials. Investment firms escaped charges in a 123-count indictment
brought by Attorney General Andrew M. Cuomo last month against two aides
to the former state comptroller, Alan G. Hevesi, who were accused of
selling access to the state’s $122 billion pension fund and
reaping millions of dollars for themselves. The SEC brought a parallel
action against the two aides, accusing them of violating several
securities laws. Investigators are now scrutinizing the role played by
several firms for potential civil charges.
href='http://www.nytimes.com/2009/04/14/nyregion/14carlyle.html?ref=business&pagewanted=print'>Read
more.
Autos
Chrysler Creditors Plan
Counteroffer
Chrysler LLC's creditors are planning to make a
counteroffer this week to the U.S. Treasury, which originally asked
lenders owed about $6.9 billion to accept just $1 billion to keep the
auto maker from liquidating, the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today. The lending group is now weighing whether to ask for equity in a
company combining Chrysler with potential partner Fiat SpA in exchange
for concessions. The government's current proposal doesn't include any
equity and asks lenders to give up 85 percent of what is owed them. The
government has demanded that a deal be completed by April 30.
href='http://online.wsj.com/article/SB123966464887115105.html#mod=testMod'>Read
more. (Subscription required.)
Michigan Governor
Accepting of 'Surgical' GM Bankruptcy
Michigan Governor Jennifer Granholm (D) said that the
federal government’s plan for a “surgical bankruptcy”
that makes the domestic auto industry stronger is something that may not
be desirable, but may be inevitable, the
face='Times
New
Roman' size='3'>Detroit Free Press reported
today. “If it makes the company strong than I suppose that’s
something that we can live with,” Granholm said at a town hall
meeting to discuss the impact of the federal stimulus package. Before
bankruptcy occurs, however, she wants to see bondholders begin to
bargain in good faith with the automakers because a pre-bankruptcy
agreement “is going to be better than the haircut that
they’re going to have to take otherwise.” The automaker,
however, is not the only Michigan entity in trouble. The state may end
up plugging part of its projected $1.6 billion deficit with
discretionary funds designated for the state in the federal stimulus
package.
href='http://www.freep.com/article/20090413/NEWS06/90413024/Granholm+++Surgical++GM+bankruptcy+may+be+inevitable'>Read
more.
In related news, a National Highway Traffic Safety
Administration notice said that General Motors Corp. is recalling 1.5
million vehicles because engine oil could spill onto the exhaust system,
and it could cause an engine fire, the
face='Times
New
Roman' size='3'>Toledo (Ohio) Blade reported
today. It affects the following vehicles, equipped with a 3.8-liter V6
engine: 1997-2003 Buick Regal, 1998-2003 Chevrolet Lumina, Monte Carlo,
and Impala, 1998-1999 Oldsmobile Intrigue, and 1997-2003 Pontiac Grand
Prix.
href='http://www.toledoblade.com/apps/pbcs.dll/article?AID=/20090413/BUSINESS02/904130231'>Read
more.
Retail
Analysis: Brand Names
Live after Stores Close
While a string of retailers have gone into bankruptcy
in the past year, including Sharper Image, Linens ’n Things,
Circuit City and Fortunoff, their brand names live on, according to a
report today in the
face='Times New Roman' size='3'>New York Times
size='3'>. The companies that have breathed new life into these brand
names are some of the same ones that had led the stores through their
dying days — the liquidators. Hilco Consumer Capital in Toronto, a
division of the liquidator Hilco Trading Company and Gordon Brothers
Brands, a division of another liquidator, Gordon Brothers, in Boston,
have bought the rights to use the names of Sharper Image, Linens
’n Things and Bombay, the onetime furniture retailer. The asset
recovery specialists have also expressed an interest in buying the
Circuit City and Fortunoff names. Already, new merchandise with the
Sharper Image name is available at retailers like Macy’s, J. C.
Penney and Bed Bath & Beyond.
href='http://www.nytimes.com/2009/04/14/business/14liquidate.html?ref=business&pagewanted=print'>Read
more.
Furniture Retailer Z
Gallerie Files for Chapter 11
Furniture company Z Gallerie has filed for chapter 11
protection to strengthen its balance sheet and get out from lease
obligations associated with 21 closed stores and an Atlanta distribution
center,
size='3'>Furniture Today reported yesterday.
The privately held retailer said that all of its remaining stores will
stay open and that 'it has sufficient cash to operate all aspects of its
business, including custom furniture orders through its stores and Web
site, and is seeking Court approval to do so.' The retailer's list of
its largest 20 unsecured creditors appears to include a number of
landlords, but no furniture suppliers. Earlier this year, Z. Gallerie
closed 21 of its 78 stores in various markets.
href='http://www.google.com/hostednews/ap/article/ALeqM5ikymwYIOopCKgNCXplo_p58i7QAQD97HQAB80'>Read
more.
Bankruptcy Fuels Fear over
Preakness
With just a month to go before the Preakness Stakes at
Pimlico Race Course, the bankruptcy of the company that owns the track
and the race has unleashed a wave of distress among politicians and the
public over whether Maryland could lose its cherished second leg of the
Triple Crown, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The Maryland General Assembly yesterday passed
emergency legislation authorizing the state to buy or seize the race
course by eminent domain if necessary, declaring the Preakness “a
sporting event of historical and cultural importance to the State of
Maryland.” The bill, passed on the last day of the General
Assembly’s session, also approved the purchase or seizure of the
race’s trophy, the Woodlawn Vase; another track, in Laurel, Md.; a
training center; and all trademarks, copyrights and other intellectual
property associated with the Preakness, including the name itself. All
are owned by the Magna Entertainment Corp., a Canadian company that
declared bankruptcy in March, and said that it expected to sell the
property and other assets.
href='http://www.nytimes.com/2009/04/14/sports/othersports/14pimlico.html?_r=1&ref=us&pagewanted=print'>Read
more.
BearingPoint Seeks to Avoid
Indemnifying Directors
Bankrupt technology consulting firm BearingPoint Inc.
and its unsecured creditors have asked a court to rule that the company
does not need to indemnify its managing directors for legal defense
costs,
size='3'>Bankruptcy Law360 reported yesterday.
In a motion filed Friday in the U.S. Bankruptcy Court for the Southern
District of New York, BearingPoint's unsecured creditors asked the court
to reconsider a March 30 order authorizing the company to assume
agreements with its managing directors. The committee is asking the
court to vacate that order with respect to the roughly 25 agreements
that require BearingPoint to indemnify directors for legal defense
costs, according to the motion. Although it agreed to BearingPoint's
assumption of the agreements with managing directors, it did not know
about the indemnification provisions at the time, the committee
said.
href='http://bankruptcy.law360.com/print_article/96439'>Read
more. (Subscription required.)
IdleAire Seeks Conversion
to Chapter 7 after Asset Sale
With the bulk of its assets sold to prepetition
lenders, IdleAire Technologies Corp. has asked a bankruptcy court to
convert the remainder of its chapter 11 case to a chapter 7
liquidation, Bankruptcy Law360 reported
yesterday. The motion to convert notes indicates that the going-concern
sale has been consummated and that the debtor has no resources to
propose or confirm a chapter 11 reorganization plan. The case
is
size='3'>IdleAire Technologies Corp., case
number 08-10960, in the U.S. Bankruptcy Court for the District of
Delaware.
href='http://bankruptcy.law360.com/articles/96480'>Read
more. (Subscription required.)
Goldman Using Share Sale
to Return Bailout Funds
Six months after accepting a financial lifeline from
Washington, a newly profitable Goldman Sachs is pushing to return the
billions of taxpayer dollars that it received in an effort to extricate
itself from heightened government control, the New York
Times reported today. Goldman, which rode out
the final, tumultuous months of 2008 with the help of a federal rescue,
reported strong quarterly profits yesterday and said that it would seek
to raise money in the capital markets to repay the government. If
successful, Goldman would become the first major bank to return funds
received under the Troubled Asset Relief Program.
href='http://www.nytimes.com/2009/04/15/business/15goldman.html?ref=business&pagewanted=print'>Read
more.
Creditors Find Hicks
Sports Group in Default
Creditors to Texas financier Tom Hicks's Hicks Sports
Group have declared the company in default, a measure that could
eventually dislodge the Texas Rangers baseball club and Dallas Stars
hockey franchise from his control, the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today. The default notice is the strongest sign yet of the economic
perils awaiting the country's professional sports leagues, where owners
have spent lavishly on player salaries. Many owners' personal fortunes
are also on the wane, creating uncomfortable standoffs between the
owners and lenders. In Hicks's case, a group of 40 financial
institutions and other investors hold $525 million in debt. Galatioto
Sports Partners, a New York sports-financing group, holds the largest
position, having lent nearly $100 million to Hicks Sports Group. Hicks
missed a $10 million quarterly interest payment on March 31, triggering
the default notice. The teams are unable to fund both their operating
expenses and debt service, and Hicks has declined to continue making up
the difference out of his own pocket.
href='http://online.wsj.com/article/SB123967866588416173.html'>Read
more. (Subscription required.)
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