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July 25, 2005
House to Hear Testimony on New Bankruptcy Law
The House Judiciary Commercial and Administrative Law Subcommittee
plans to hear testimony tomorrow on the implementation of the bankruptcy
overhaul law enacted in April, CongressDaily reported
today. The law requires debtors who have the means to repay their debts
to enter a court-ordered repayment plan under chapter 13 of the
Bankruptcy Code, rather than having their debts canceled under chapter
7.
Pension Bill to Be Marked Up Tomorrow
The Senate Finance Committee will mark up pension legislation
tomorrow, likely adopting some kind of pension relief for struggling
airlines, CongressDaily reported today. The bill includes a
formula that the administration proposed for companies to use to
calculate their pension contributions, which companies say would result
in unnecessarily higher payments. Airlines may get more time to stretch
out their pension liabilities, something that was not included in the
chairman’s mark that was introduced Friday, but aides are
negotiating an amendment likely to come before the committee
tomorrow.
Credit Data Firm Might Close
The head of a payment processing firm that was infiltrated by
computer hackers, exposing as many as 40 million credit card holders to
possible fraud, told Congress on Thursday that his company is
“facing imminent extinction” because of its disclosure of
the breach and industry's reaction to it, the Washington
Post reported on Friday. CardSystems is one of several firms that
serve as a little-known hub in the nation's commerce system,
transferring payments between the banks of credit card-using consumers
and the banks of the merchants where purchases are made. “As a
result of coming forward, we are being driven out of business,”
John M. Perry, chief executive of Atlanta-based CardSystems Solutions
Inc., told a House Financial Services Committee subcommittee considering
data-protection legislation. He said that if his firm is forced to shut
down, other financial companies will think twice about disclosing such
attacks.
Bankruptcy Protection Ahead for GM—Auto Expert
Weak sales, high costs and strong competition from Asian competitors
have lead to financial problems in the U.S. auto industry,
Motoring.co.za. reported. The Big Three have launched aggressive pricing
campaigns that offer the public the same discounts as employees, but
many analysts say incentives will not be enough. Some analysts are
predicting that recent job cuts are just the tip of the iceberg after
General Motors announced its second quarter of major losses last week.
“I don’t think GM is going to disappear, but it has to
become a smaller company,” said Joe Barker, an analyst with CSM
Worldwide in Farmington Hills, Mich.
Objections Raised to Adelphia Deal
DirecTV Inc. has asked the Federal Communications Commission to put
restrictions on Adelphia Communications Corp.’s joint merger with
Time Warner Inc. and Comcast Corp., the Hollywood Reporter
reported Thursday. Part of media mogul Rupert Murdoch’s News
Corp., DirecTV says that the proposed $17.6 billion deal could stifle
competition in markets where the two cable giants can solidify their
customer base. In particular, DirecTV worries that the deal will let the
companies withhold popular sports programming from satellite TV
operators. DirecTV says the companies should be subjected to similar
restrictions that were placed on News Corp. when it bought DirecTV.
New Law Steers Struggling Consumers to Credit Counselors—Who
Have Their Own Problems
Just three months before the nation’s new bankruptcy law kicks
in, unanswered questions surround a key provision meant to reduce the
number of personal bankruptcies, the Seattle Times reported
yesterday. The law will require people to consult with a nonprofit
credit-counseling agency before they can file for bankruptcy protection.
But the result could be to steer them to an industry in turmoil over
regulatory allegations of fraud, audits by the Internal Revenue Service
and criticism from Congress. “The ultimate nightmare scenario is
that families struggling with serious debt trouble will be forced under
the new law into the hands of unscrupulous credit counselors,”
said Travis Plunkett, legislative director for the Consumer Federation
of America. The requirement for counseling could convince up to 10
percent of the 1.6 million people who file for bankruptcy each year to
find a way to pay off their debts instead.
href='http://seattletimes.nwsource.com/html/businesstechnology/2002398888_cre…'>Read
the full article.
Awrey Bakeries Sold out of Bankruptcy for $25 Million
U.S. Bankruptcy Judge Steven Rhodes on Thursday approved
Livonia-based Awrey Bakeries Inc.’s decision to sell the company
to Northbrook, Ill.–based Hilco Equity Management L.L.C. for $25
million, Crane’s Detroit.com reported yesterday. Hilco agreed to
buy Awrey’s 200,000-square-foot bakery, as well as recipes, land,
inventory, equipment, contracts and the Awrey name. Hilco plans to
operate the company in Livonia under the Awrey name, said Ryan Bohr,
principal for Hilco.
No Road Work Ahead
A contractor’s bankruptcy has left several Houston-area road
and street projects unfinished, and has officials and insurers
scrambling to find other firms to get the work done, the Houston
Chronicle reported Friday. Contractor Technology Ltd. sought
chapter 11 reorganization in federal bankruptcy court May 13. On June
23, it asked the court to dissolve the company. Also known as Contractor
Technology Inc. and CTI, the firm’s clients included the Texas
Department of Transportation, Harris County, the cities of Houston and
West University Place and the Metropolitan Transit Authority.
Bankruptcy Court Approves FiberMark Reorganization Plan
FiberMark Incorporated’s business reorganization plan has won
preliminary approval in U.S. Bankruptcy Court, the Associated Press
reported today. The company makes cloth and paper products. After it
emerges from bankruptcy, FiberMark will go from public to private
ownership and its bondholders will become its owners.
Asbestos Stocks Hostage to Fate of Legislation on Liability
Six months ago, shares of W.R. Grace & Co. were on a sharp
upswing, up more than 400 percent last year, the Washington
Post reported today. The increase was based on the expectation
that Congress would soon pass legislation limiting the liability of
companies facing asbestos lawsuits, enabling Grace to come out of
bankruptcy, put the asbestos business behind it and resume its core
business as a chemical and building-supplies company. But the asbestos
bill hasn’t come up for a vote in the Senate, and Grace shares
have plunged 40 percent since the first of the year. The stock price
dropped 8 percent in February after a criminal case was filed accusing
Grace of exposing miners and residents of Libby, Mont., to asbestos and
then covering up the danger. The stock fell again in June when the New
Jersey attorney general sued, accusing Grace of falsely claiming that it
had cleaned up a site in the suburbs of Trenton where material mined in
Libby was processed.
Bankruptcy Tide Rising Again across Ohio
Ohio is on pace to again break its record of annual bankruptcy
filings, a reflection that economic gains enjoyed elsewhere around
America remain in short supply in Ohio, the Columbus Business
First reported Friday. For five consecutive years, an increasing
number of individuals and companies in Ohio have gone bankrupt. Last
year, filings were up only slightly, but the number of filings in Ohio
over the first six months of 2005 has jumped, and experts expect that
the pace of filings will pick up in the last half of the year. Central
Ohio has the highest number of bankruptcy filings in the state this
year. In the first six months of 2005, 47,764 individuals and companies
filed for bankruptcy. If that pace continues, 2005 would be marked by a
6.2 percent increase in bankruptcies.
Federal Loan Board Approves Plan for 2 Airlines to Merge
The proposed merger between US Airways and America West Airlines
Thursday won the support of the federal loan board that granted the
companies more than $1 billion in aid after the September 2001 attacks,
the New York Times reported on Friday. The board endorsed
the deal yesterday on a unanimous vote, after the airlines reached
agreement with the board on revised terms of their guaranteed loans. The
deal, which includes $535 million in outside investments, was to be
completed when US Airways emerges from bankruptcy, which it plans to do
this fall.
China Suppliers Join in Plan to Rescue Huffy
Huffy filed for chapter 11 bankruptcy-law protection in October 2004,
leaving its Chinese suppliers with unpaid bills. Barry Metzger, a lawyer
with law firm Coudert Brothers, put together a group of the Chinese
suppliers with the Chinese Export & Credit Insurance Corp. to take a
30 percent equity stake in the maker of bikes and other recreational
equipment. The Chinese group also will get four of the reorganized
company’s seven board seats.
eToys Investors Claim Conflict at Law Firm
When online retailer eToys Inc. entered bankruptcy proceedings in
2001 and top managers quit, the company appointed a caretaker chief
executive officer to help settle its debts. That appointment is now at
the center of a controversy over an alleged conflict-of-interest that
could bring sanctions against one of the biggest names in bankruptcy
law, Paul Traub, along with his New York–based law firm, Traub,
Bonacquist & Fox, the Wall Street Journal reported
today. A bankruptcy judge in Delaware is reviewing the circumstances
surrounding the CEO’s appointment and weighing a motion by the
bankruptcy trustee to make the law firm return $750,000 in legal fees.
At issue is whether Traub, attorney for a group of eToys creditors,
deliberately withheld information from the court about a business
relationship with Barry Gold, recommended by the Traub firm for the CEO
job. The two men jointly own Asset Disposition Associates, a liquidation
concern that isn’t involved in the eToys case, according to
bankruptcy court filings.
Winn-Dixie’s Fees Top $9 Million
Consultants and law firms for Winn-Dixie Stores Inc. are seeking more
than $9 million in compensation, bizjournals.com reported. Six law firms
and consulting companies have petitioned the U.S. Bankruptcy Court for
the Middle District of Florida for compensation approval. The
applications present detailed outlines of the services the companies
have provided to Winn-Dixie and the expenses they have accrued since the
grocer filed for bankruptcy on Feb. 21. The filings are the first in a
series that will continue each quarter as long as Winn-Dixie remains
under the protection of chapter 11.