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June 16, 2009
size='3'>House Panel to Examine Needs of
Bankruptcy Judges
The House Judiciary Commercial and Administrative Law
Subcommittee will hold a hearing today titled “Bankruptcy
Judgeship Needs” at 11 a.m. ET. Scheduled to testify are U.S.
District Court Judge Barbara M. G. Lynn (N.D.
Texas; Dallas) on behalf of the Judicial
Conference of the U.S., Bankruptcy Judge
face='Times New Roman' size='3'>David S. Kennedy
size='3'>(W.D. Tenn.; Memphis) on behalf of
the National Conference of Bankruptcy Judges, William Jenkins, Jr.,
Ph.D., Director of Homeland Security and Justice Issues at the U.S.
Government Accountability Office (Washington, D.C.) and
face='Times



New


Roman'>
face='Times New




Roman'
size='3'>Carey D. Ebert of Ebert Law Offices, P.C.
(Hurst, Texas) on behalf of the National Association of Consumer
Bankruptcy Attorneys.
href='http://judiciary.house.gov/hearings/hear_090616.html'>Click
here for prepared witness testimony.
Analysis: More Credit Card
Issuers Cutting Deals on Balances
As they confront unprecedented numbers of troubled
customers, credit card companies are increasingly doing something they
have historically scorned: settling delinquent accounts for
substantially less than the amount owed, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The practice started last fall as the economy
worsened. Experts say that many credit card issuers have revised
internal guidelines to give front-line employees the power to cut deals
with consumers. The workers do not even have to wait for customers to
call and ask for a break, but only a few creditors are willing to
confirm the practice. Bank of America and American Express say they
decide on a case-by-case basis whether to accept less than the full
balance. Other card companies refuse to discuss the subject, but their
trade group, the American Bankers Association, acknowledges that
settlements are becoming more common.
href='http://www.nytimes.com/2009/06/16/your-money/credit-and-debit-cards/16credit.html?_r=1&ref=business&pagewanted=print'>Read
more.
Extended Stay Hotels Files
for Bankruptcy Protection
Extended Stay Hotels, which operates a chain of
mid-priced extended stay hotels in 44 U.S. states and two Canadian
provinces, filed for bankruptcy protection yesterday citing decreased
revenue and high debt costs, Bloomberg News reported yesterday. The
Spartanburg, S.C.-based chain, with more than 680 properties, said in
papers filed today in U.S. Bankruptcy Court in New York that it had $7.1
billion in assets and $7.6 billion in debts at the end of last year. The
bankruptcy filing by Extended Stay and 69 affiliates follows a failed
attempt by the company to restructure $3.3 billion in mezzanine debt,
with Bank of America Corp. and Wachovia Bank NA as lenders. A group of
junior debt holders sued in New York and Texas state courts to block the
transaction. The case is
face='Times New Roman' size='3'>In re Extended Stay Inc.
size='3'>, 09-13764, U.S. Bankruptcy Court, Southern District of New
York (Manhattan).
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aSSgPmHvUslU'>Read
more.
of NHL’s Coyotes
Bankruptcy Judge
face='Times New Roman' size='3'>Redfield Baum
size='3'>rejected the proposed sale of bankrupt Phoenix Coyotes hockey
team to the co-CEO of BlackBerry maker Research in Motion (RIM) who
planned to move the team to Canada, Reuters reported today. Judge
Baum ruled yesterday that the June 29 deadline proposed by RIM co-CEO
James Balsillie did not allow enough time to settle the complex case.
Canadian billionaire Balsillie offered to buy the money-losing hockey
team for $212.5 million in May when it filed for bankruptcy protection,
on condition it relocate to Hamilton, a Canadian city located between
Toronto and Buffalo, N.Y. An auction for the team had been scheduled for
June 22, but has been canceled.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/15/AR2009061503351_pf.html'>Read
more.
Autos
Commentary: DIPping Into
Delphi
The Obama Administration's fast-track sale of bankrupt
auto-parts supplier Delphi hit a speed bump late last week when
Bankruptcy Judge
face='Times New Roman' size='3'>Robert Drain
size='3'>ordered that Delphi conduct an open auction for its assets,
according to an editorial in today’s
face='Times New Roman'>Wall
Street Journal. That has a number of
distressed-debt investors circling and may also mean that the public
will get some answers about the curiously structured sale that GM had
quietly put forward the same day it filed for bankruptcy protection
itself. Under that deal, a bankrupt GM was set to provide most of the
funding for Delphi's exit from bankruptcy, with private-equity firm
Platinum Equity throwing in some cash and getting a sizable equity stake
in return. The investors who have so far provided most of the
debtor-in-possession (DIP) financing during Delphi's four-year
bankruptcy case would have gotten as little as 20 cents on the dollar --
almost unheard-of in bankruptcy cases. Those investors cried foul,
pointing out that DIP financers generally have the right to take control
of the company if they cannot be paid in full. GM and the government at
first threatened to play hardball, claiming that Platinum was the only
buyer acceptable to GM and so its deal was the only one on the table.
When the government arranged the Chrysler and GM bankruptcies, it noted
with some justification that, as the DIP financer for the cases, it had
wide latitude to determine the companies' fates and ownership structure.
However, when it comes to Delphi's private DIP lenders, it has taken a
very different position, apparently in the interests of wrapping up
Delphi's case as quickly as possible to speed GM's own exit from
bankruptcy.
href='http://online.wsj.com/article/SB124511955030617745.html'>Read
more. (Subscription required.)
Property Tax Collectors
Object to GM Financing
The city of Detroit has objected to General Motor
Corp.’s interim approval to access $33.3 billion in
debtor-in-possession and post-petition financing, asking the court
overseeing the auto giant’s chapter 11 proceedings to provide
protection for the city to recoup GM’s unpaid property
taxes,
size='3'>Bankruptcy Law360 reported yesterday.
In an objection filed yesterday, the city of Detroit, as well as the
treasurers for Wayne and Oakland County, Mich., objected to the
debtors’ motion for final approval of the financing facility,
arguing that it excludes the tax collectors from having a first lien on
prepetition property. The creditors seek to preserve their priming liens
by having the court grant the motion for DIP financing, but limit the
provision for adequate protection liens to the DIP lenders by the
permitted liens as defined in the DIP facility.
href='http://bankruptcy.law360.com/print_article/106530'>Read
more. (Subscription required.)
GM Sells Saab to Swedish
Automaker
General Motors announced today that it had reached a
tentative agreement to sell its Swedish unit, Saab Automobile, to a
consortium led by the sports car maker Koenigsegg Automotive, the
size='3'>New York Times reported today. The
companies said that they had signed a memorandum of understanding,
contingent on $600 million of financing from the European Investment
Bank that is to be guaranteed by the Swedish government. They did not
release further financial details, but Saab has said that it would need
about $1 billion to upgrade its operations. The deal is expected to
close in the third quarter of this year.
href='http://www.nytimes.com/pages/business/index.html'>Read
more.
In related news, Weil, Gotshal
& Manges LLP earned $54 million in fees and expenses in the six
months leading up to General Motors’ June 1 bankruptcy filing,
according to a recent court filing by Weil Gotshal and reported in
today’s
size='3'>Wall Street Journal. The firm's
lawyers are billing GM at a rate of $355 to $950 per hour. Other GM law
firms have also registered sizeable paydays. Honigman Miller Schwartz
and Cohn LLP was paid $15 million for one year of work leading up to the
bankruptcy, and Jenner & Block LLP collected $11 million in
prebankruptcy fees and expenses, according to court filings.
href='http://online.wsj.com/article/SB124511211936517221.html'>Read
more. (Subscription required.)
WCI Objects to Bid for
Drywall Class Certification
Bankrupt WCI Communities Inc. is asking a court to
block a woman from filing a claim on behalf of a class whose members
allegedly bought WCI homes with problematic Chinese drywall,
size='3'>Bankruptcy Law360 reported yesterday.
In an objection filed Friday in the U.S. Bankruptcy Court for the
District of Delaware, WCI said a court shouldn't allow the class
certification motion of Cindy A. Goldstein for leave to file a class
proof of claim because she failed to provide any evidence to meet the
burden of a class action. Goldstein asked the court on May 18 to certify
a class for purposes of pursuing claims on theories of negligence,
strict liability, breach of warranty and negligent misrepresentation.
Bank of America NA and the unsecured creditors’ committee filed
joinders to the objection. A hearing on the matter is scheduled for July
1. Read
more. (Subscription required.)
U.S. Trustee Balks at
Charter Chapter 11 Plan
U.S. Trustee
face='Times New Roman' size='3'>Diana Adams
size='3'>filed an objection on Friday to Charter Communications
Inc.’s reorganization plan, saying that improper nondebtor
releases, which block claims against third parties, make the plan
unconfirmable,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Adams said that the plan improperly
extinguishes claims against parties that are not debtors, including
claims brought by the debtors' equity holders. Under the nondebtor
release provision of the plan, Charter's members, officers, directors,
employees, affiliates, attorneys and representatives are released from
any and all causes of legal action. While the debtors claim that the
releases are justified because they are part of a settlement that is key
to the plan, the trustee argues that some of the nondebtors granted
releases by the plan are not contributing funds to the estate, and
equity holders are also not agreeing to the releases.
href='http://bankruptcy.law360.com/articles/106453'>Read
more. (Subscription required.)
Building Materials Files
for Chapter 11
Construction services company Building Materials
Holding Corp. said that it filed for chapter 11 protection and signed an
agreement with a secured lender group to restructure its balance sheet,
Reuters reported today. The San Francisco-based company, which provides
building materials to home builders and contractors, said that it
received commitments for $80 million in debtor-in-possession financing
from Wells Fargo Bank and certain of its other existing lenders. In a
filing that included the company's subsidiaries, the company listed
total assets of about $480.1 million and total liabilities of about
$481.3 million. According to the company’s proposed reorganization
plan, the company's existing secured lenders will convert their
interests into equity in the newly reorganized company and will receive
interests in $135 million in newly issued long-term notes. The case
is
size='3'>Building Materials Corp., U.S.
Bankruptcy Court, District of Delaware, No. 09-12074.
href='http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSBNG48356520090616'>Read
more.
Judge Approves Anchor
Blue’s Outlets Sale
Despite objections from the U.S. trustee overseeing
the chapter 11 proceedings of clothing retailer Anchor Blue Retail Group
Inc., a judge has paved the way for Levi Strauss & Co. to purchase
72 of the bankrupt chain’s outlet stores,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Bankruptcy Judge
face='Times New Roman'>
size='3'>Peter Walsh on Friday approved the
debtor’s bidding procedures for the stores, noting that Anchor
Blue had “articulated good and sufficient reason” for the
sale to proposed stalking horse bidder Levi’s. The order approved
the bidding procedures and established Levi’s as the
stalking-horse bidder over objections from U.S. Trustee
size='3'>Roberta A. DeAngelis, who claims
that the sale may not be in the best interest of the debtors. In a
limited objection filed Wednesday, DeAngelis said that the rapid timing
of the proposed sale of Anchor Blue's Dockers Outlet by Most to Levi's
might preclude the company from getting the best price.
href='http://bankruptcy.law360.com/articles/106337'>Read
more. (Subscription required.)
Linens 'N Things
Liquidation Plan Approved
Bankruptcy Judge
face='Times New Roman' size='3'>Christopher S. Sontchi
size='3'>signed off on the Linens 'n Things third amended reorganization
plan on Friday, opening the door to a final liquidation of its remaining
assets,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The company estimated in the disclosure
statement that it would have a total of $45 million in administrative
claims outstanding at the end of its reconciliation and resolution
process, including $25 million in claims to landlords for May store
rent. The company also anticipated having $669 million in senior notes
claims, $12.5 million in priority tax claims and $1.1 billion in general
unsecured claims, according to the disclosure statement. No effective
date was set for the plan, which was first submitted in January.
href='http://bankruptcy.law360.com/print_article/106466'>Read
more. (Subscription required.)
Cosmetics Company Files
for Chapter 11
Isolagen Inc., which makes anti-wrinkle products,
filed for chapter 11 protection yesterday, Reuters reported today. In a
filing with the U.S. Bankruptcy Court for the District of Delaware, the
company listed no total assets and total liabilities of about $88.1
million.
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