March 6, 2000
Bankruptcy Filings Drop 8.5 Percent in 1999
The total number of bankruptcies filed during calendar year
1999 totaled 1,319,465, a 8.5 percent decreased from the previous
calendar year, according to data released by the Administrative Office
of the U.S. Courts. The total number of filings for the fourth quarter
of 1999 was 318,634, down 1.5 percent from the third quarter of 1999 and
down nearly 10 percent from the same period a year earlier. Last year
was the first year in the last four to not set a new national record for
filings, but the total number of filings in 1999 is still the third
highest number of filings ever. ABI Executive Director Sam Gerdano said
that 'The tidal of wave of new bankruptcies appears to have subsided
somewhat. However, the rate of filing demonstrates that U.S. consumers
are still under financial stress, notwithstanding a healthy
economy.'
Chapter 11 filings rose to 9,135 in calendar year 1999, up from 8,386
in 1998. Chapter 7 filings decreased by 10.5 percent to 927,074, and
chapter 13 filings, which represented the largest group of filings in
the year, declined 3.9 percent to 382,214. During 1999, chapter 12
filings increased slightly from 807 to 834.
Personal bankruptcies account for 97.12 percent of the total new
cases filed in the last 12 months. These cases decreased to 1,281,581 in
the 1999 calendar year, down 8.3 percent when compared to 1998. In the
fourth quarter of 1999, personal filings dropped 9.7 percent from the
third quarter.
The only districts that saw increases in business and personal filing
from Jan. 1, 1999 to Dec. 31, 1999, were the District of Delaware (57.6
percent), E.D. Louisiana (7.5 percent), District of Utah (.8 percent)
and N.D. Georgia (.3 percent). The districts with the highest percentage
decline in business and personal filings for the year were N.D.
California (22.1 percent), S.D. Calif. (18.7 percent), District of New
Hampshire (17.8 percent), District of Massachusetts (16.7 percent) and
District of Minnesota (16 percent).
Bankruptcy Reform Act Co-sponsors Respond to Editorial
Reps. George W. Gekas (R-Pa.), Rick Boucher (D-Va.) and Adam
Smith (D-Wash.), co-sponsors of H.R. 833, the House's Bankruptcy Reform
Act, responded to a Feb. 18 editorial in The Washington Post
with a letter to the editor in Saturday's Post. They write,
'Opponents of our bankruptcy reform bill lay blame for the dramatic
increase in bankruptcy filings on creditors who 'entice'...people into
debt. While a high debt burden is certainly a major cause of
bankruptcies, people are not 'enticed' to spend money; they spend money
on things that they want. But as your paper accurately states, 'the
number of people filing for bankruptcy has soared from 33,0,000 in 1980
to 1.4 million in 1999.' In the strongest economy in a generation, one
in every 100 families declares bankruptcy. We believe that it is far too
easy for high-income debtor to declare bankruptcy and walk away from
their debts.' In the letter they tout means-testing and state that the
proponents of bankruptcy reform 'are not proposing to close the door to
bankruptcy protection to anyone. We simply want to return personal
responsibility to a system that has gone haywire.' A link to Saturday's
letter to the editor can be found under 'What's New' on ABI World.
California Court Rules That Bank Cannot Force Customer into
Arbitration
Alameda County, Calif., Superior Court Judge Richard Hodge
recently denied a motion by Bank of America to compel arbitration
against college student Andre Watkins, according to The Recorder/Cal
Law. Watkins filed a suit against Bank of America for alleged
misconduct in handling a problem with his checking account, but the bank
argued that Watkins had agreed to its terms and conditions when he
opened the account and signed a one-page 'master agreement.' The form
Watkins signed does not specifically mentioned alternative dispute
resolution (ADR), but the bank said that the form clearly stated that
other 'written information we give you is part of this agreement,'
including a pamphlet Watkins should have received that outlined the ADR
provision. In his ruling, Judge Hodge said the one-page agreement
appeared only to ask for a signature authorizing the bank to pay out
funds from the account and certifying that the customer had provided
accurate information. He also said the agreement did not adequately
spell out the terms of Bank of America's ADR provision and that the
provision does not spell out the implications, namely the waiver of a
customer's right to a jury trial. According to an attorney representing
Watkins, 'This could be far-reaching and affect every Bank of America
arbitration agreement.' The bank has not yet determined whether it will
appeal.
McCaw Will Not Invest in Iridium
Cellular pioneer Craig McCaw and his team of investors have
abandoned their interest in bailing out Iridium LLC, which is currently
operating in chapter 11, according to the Associated Press. Analysts had
speculated that McCaw would combine Iridium's project with that of
also-bankrupt ICO Global and McCaw's own Teledesic project, but in a
statement issued Friday, the group said that Iridium would not make such
a good fit with the other ventures. Iridium said that it remains
committed to a sale of its assets and is aggressively pursuing other
potential qualified buyers. At the company's request, the Bankruptcy
Court for the Southern District of New York postponed a hearing
scheduled for Friday. Iridium COO Randall Brouckman said, 'We have
received expressions of interest from other potential buyers. Much
attention has been afforded the potential McCaw bid. Now that he has
clarified his intentions, we believe that the quality of our system and
the value of our assets should attract additional qualified proposals.'
Iridium filed chapter 11 last August, after it was unable to make
payments on debts of about $4.4 billion.
AgriBio Tech Announces Approval of Interim Financing
AgriBio Tech Inc. (ABT), Henderson, Nev., announced Friday that
the bankruptcy court has authorized the company to enter into a chapter
11 debtor-in-possession (DIP) agreement with its pre-bankruptcy lenders
and that on Feb. 24 the court approved on an interim basis the facility
with Bank of America N.A. as agent and Deutsche Financial Services Corp.
as administrative agent for the bank group. A final hearing is scheduled
for March 22. Until then, the company may borrow only up to $23 million
under the credit facility. ABT is preparing a bid solicitation package
to be disseminated to eligible parties interested. William J.
Brandt of Development Specialists Inc., said that 'While we are
confident that solicitation process will help maximize the value of the
company's assets, at this stage, it is impossible to predict the level
of interest among potential purchasers, and it remains uncertain at best
whether the liquidation proceeds will be sufficient to generate any
distribution to the company's stockholders.' Bradley
Sharp, a DSI principal and court-appointed consultant to ABT,
said that the DIP facility is critical to the company's ongoing
operations because of the cash flow shortage.
El Al in Talks with Tower Air
State-controlled El Al Israel Airlines will begin talks this
week with U.S.-based Tower Air Inc. regarding a potential investment or
cooperation, the Israeli airline said yesterday, Reuters reported. 'El
Al is making its first assessment of the situation and will be meeting
this week with Tower representatives,' according to an El Al
spokesperson. Tower filed chapter 11 in late February but is continuing
operations while negotiating with creditors. As a non-U.S. company, El
Al would be ineligible to acquire more than a 24.9 percent interest.
Tower operates scheduled flights from New York to Athens, San Francisco,
Los Angeles, Miami, Paris and Tel Aviv, among other cities.
Garden Botanika Announces Extension of Exclusivity Period
Garden Botanika Inc., Redmond, Wash., announced that its
exclusivity period to file a plan has been extended until March 1, 2001,
with the support of the creditors' committee, according to a newswire
report. The extension provides that if the company files a plan during
the exclusivity period, the committee also would have the right to file
a plan. Garden Botanika, a cosmetics and personal care products company,
said the extension is an 'important indiction of the confidence our
creditors have in the directions we've set.'
Abacan Makes Assignment into Bankruptcy
As expected, Abacan Resource Corp., Calgary, announced Friday
that it made a voluntary assignment for the general benefit of creditors
pursuant to Canada's Bankruptcy and Insolvency Act, according to a
newswire report. All the officers and directors of the company resigned
as of March 2.
Harnischfeger Announces Settlement of APP Disputes
Harnischfeger Industries Inc., Milwaukee, announced Friday that
it has signed a definitive agreement to settle disputes and related
pending arbitration and legal proceedings with Asia Pulp & Paper Co.
Ltd. (APP), according to a newswire report. The disputes arose out of
the proposed sale by Harnischfeger's Beloit Corp. subsidiary of two fine
papermaking machines to an APP subsidiary Under the settlement, APP will
pay $135 million to Beloit and $16 million to Harnischfeger. The
agreement is subject to the bankruptcy court's approval because the
company and its subsidiaries filed chapter 11 last June.
Southern California Doctor Found Guilty in Large-scale Health
Care Fraud Case
Keith O'Neill Perry, a doctor who operated medical clinics in
South -Central Los Angeles, has been convicted of more than three dozen
federal charges involving interwoven fraud schemes that cost millions of
dollars to government programs, The Department of Justice announced last
week. After a two-week trial, Perry was convicted of 16 counts of mail
fraud, 16 counts of wire fraud, four counts of bankruptcy fraud and
three counts of making false statements to the U.S. Department of Health
and Human Services. With regard to the bankruptcy charges, Perry filed a
chapter 11 in 1996 and made false statements under penalty of perjury in
documents filed with the court and in a debtor's examination. Perry
concealed five prior bankruptcy cases from the bankruptcy court, the
U.S. Trustee's Office and his creditors. He also concealed a bank
account that he held with his father in Ohio. Perry, who is scheduled to
be sentenced May 8, faces a maximum possible sentence of 195 years in
federal prison. The case was investigated by members of the Southern
California Health Care Fraud Task Force, and the U.S. Trustee's Office
and others provided assistance during the trial.
Public Notice for Reappointment of Pennsylvania Bankruptcy
Judge
The current term of office of David A. Scholl, U.S. Bankruptcy
Judge for the Eastern District of Pennsylvania at Philadelphia, is due
to expire on Aug. 26, 2000. The U.S. Court of Appeals for the Third
Circuit is considering the reappointment of Judge Scholl to a new term
of of office and has determined that he appears to merit reappointment
subject to public notice and opportunity for public comment. Upon
reappointment, the incumbent would continue to exercise the jurisdiction
of a bankruptcy judge as specified in title 28, U.S. Code; title 11,
U.S. Code; and 122, 98 Stat. 333-346. In bankruptcy cases and
proceedings referred by the district court, the incumbent would continue
to perform the duties of a bankruptcy judge that might including holding
status conferences, conducting hearings and trials, making final
determinations, entering orders and judgments, and submitting proposed
findings of fact and conclusions of law to the district court.
Members of the bar and the public are invited to submit comments for
consideration by the Court of Appeals regarding the reappointment of
Judge Scholl to a new term of office. Please not that the Court of
Appeals procedures provide that 'the circuit executive shall not
disclose the identity of any person who requests confidentiality, but
shall provide the incumbent bankruptcy judge with a general description
of the source and nature of the comments.'
All comments should be directed to the following address: Office of
the Circuit Executive, Toby D. Slawsky, Circuit Executive, 22409 U.S.
Courthouse, 601 Market St., Philadelphia, PA 19106-1790. Comments must
be received no later than Friday, April 14.
PennCorp Bid Procedures Approved, Pfd Holders Prepare
Recap
On Feb. 28, PennCorp Financial Group Inc. (PFG) won bankruptcy court
approval of bidding procedures for the sale of its Dallas operations,
however, the court left the door open for the company's preferred
shareholders to put forth a recapitalization transaction for the
insurance holding company. An ad hoc committee of PennCorp's preferred
shareholders intends to file a recapitalization proposal shortly,
according to the shareholders' counsel.
Courtesy of
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6, 2000.
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