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January 6, 2010
Bankrupt Home Builder Seeks
Conversion to Chapter 7
Opus South Corp. will seek to liquidate under chapter
7 after asset sales failed to generate net proceeds for its estate, the
Deal’s Pipeline reported yesterday.
The Atlanta-based commercial and residential builder is set on Jan. 25
to seek conversion of its chapter 11 proceedings from Bankruptcy
Judge Mary
Walrath. Opus South won court approval to sell
certain assets for a total of $30.6 million on Oct. 1 and the sales
closed Oct. 16. Court documents did not detail what properties were sold
under the deals and did not mention the reported sale of a
587,528-square-foot office building in Birmingham, Ala., for roughly
$147 million to a consortium of investors. Opus South filed its
conversion request on Jan. 4––the same day the debtor won an
extension of its exclusive right to file a chapter 11 plan. Opus South
now has an additional 90 days to file a plan — until March
18.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005373000'>Read
more. (Subscription required.)
U.S. Business Bankruptcies
Rise 38 Percent in 2009
The 89,402 business bankruptcies filed in 2009
represented a 38 percent increase over the 64,584 filed in 2008, Dow
Jones
size='3'>Daily Bankruptcy Review reported
yesterday. Business bankruptcy filings in December 2009 rose 13 percent
compared with the same month in the prior year, according to research
firm Automated Access to Court Electronic Records. Commercial
bankruptcies last month also jumped 3 percent compared with November
2009. Experts expect that business bankruptcies will continue to rise in
2010.
Ninth Circuit Affirms $450
Million Award in Reinsurance Spat
The U.S. Court of Appeals for the Ninth Circuit on
Monday affirmed a $450 million arbitration award in favor of bankrupt
Superior National Insurance Co. in a dispute with U.S. Life Insurance
Co. over reinsurance coverage for workers' compensation insurance
policies,
size='3'>Bankruptcy Law360 reported yesterday.
The dispute concerned reinsurance for workers' compensation insurance
coverage offered by Superior and several affiliates, which have since
declared bankruptcy and are being liquidated under the supervision of
the California insurance commissioner. U.S. Life had initially sought to
rescind reinsurance provided to Superior and its affiliates on the
grounds that the bankrupt insurers had misrepresented their reserves
during the underwriting process and sought damages for bad faith,
according to the Ninth Circuit. Alternatively, U.S. Life sought to
reform the reinsurance contracts to reduce the amount it would have to
pay for the workers compensation liabilities, the opinion said. However,
after extensive hearings, the arbitration panel found that U.S. Life was
liable for 90 percent of the risks incurred by Superior’s
underlying policies, shaving off a percentage of the risk because of
Superior’s alleged failure to provide full information during the
contract formation period, the appeals court said.
href='http://bankruptcy.law360.com/print_article/141684'>Read
more. (Subscription required.)
Senate Banking Chairman to
Retire at End of Term
Senate Banking Chairman Christopher J. Dodd (D-Conn.)
is expected to announce today that he will not seek reelection and will
retire at the end of his term this year, the Washington
Post reported today. Dodd's political star
fell over a two-year period, during which he moved his family to Iowa to
pursue the 2008 Democratic presidential nomination and was linked to a
VIP mortgage loan program overseen by a controversial Wall Street
financier. Over the past 18 months, he has been the primary author or
co-author of legislation rewriting housing mortgage rules, the $700
billion bailout of Wall Street, key portions of the $787 billion
stimulus package, a consumer protection bill overseeing the credit card
industry, and the nearly $900 billion health care legislation that has
passed the Senate and is now in final negotiations with the House.
Richard Blumenthal (D), who has served as state attorney general since
1990, is widely expected to declare his candidacy for the seat.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/01/06/AR2010010600023_pf.html'>Read
more.
Court Confirms Simmons
Bedding Chapter 11 Restructuring Plan
Simmons Bedding Co. won approval of a chapter 11
restructuring plan that hands the company over to two private-equity
firms that control the rival Serta brand of mattresses, Dow Jones
size='3'>Daily Bankruptcy Review reported
today. Bankruptcy Judge
face='Times
New
Roman' size='3'>Mary F. Walrath signed off on
the plan at a hearing yesterday, capping a brief stay in bankruptcy for
the mattress maker. Simmons’ plan, largely unchanged from the
version it introduced when it filed for bankruptcy protection in
November, shaves $574 million in debt from the company’s balance
sheet. Under the plan, Ares Management LLC and the private-equity arm of
the Ontario Teachers’ Pension Plan – owners of the largest
manufacturer and distributor of Serta brand mattresses in the U.S. -
will control Simmons. The deal incorporates a $310 million equity
investment and $425 million in bankruptcy exit
financing.
Pre-Packaged Chapter 11
Citing a decline in the residential and commercial
construction market, International Aluminum Corp. filed a pre-packaged
chapter 11 plan on Monday,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The plan calls for senior lenders to
receive pro rata shares of
International Aluminum's excess cash plus all remaining shares of the
reorganized company's equity that have not been distributed to the
company's management. International Aluminum said the restructuring plan
had received support from 72 percent of the company's senior lenders.
General unsecured creditors will be repaid in full, according to the
plan. International Aluminum's 11 U.S. subsidiaries and its holding
company, IAC Holding Co., were also included in the filing.
Private-equity firm Genstar Capital LLC holds a more than 75 percent
stake in the holding company, according to the bankruptcy petition. The
case is In re International Aluminum Corp
size='3'>., case number 10-10003, in the U.S. Bankruptcy Court for the
District of Delaware.
href='http://bankruptcy.law360.com/print_article/141570'>Read more.
(Subscription required.)
Publisher to File
Pre-Packaged Chapter 11
Haights Cross Communications Inc., an educational
publishing group, said yesterday that it will file a pre-packaged
chapter 11 reorganization plan, which has been approved by its lenders,
Reuters reported yesterday. Haights did not disclose when or where it
would file for bankruptcy. Under the plan, the company's general
unsecured claims, including those of trade creditors, would be paid in
full. The White Plains, N.Y.-based company said that it reached an
agreement with certain lenders in September to cut its debt by about
$200 million.
href='http://www.reuters.com/article/idUSSGE6040H220100105'>Read
more.
GMAC Predicts Loss of $5
Billion
GMAC Financial Services said yesterday that it
expected to post a combined fourth-quarter loss of about $5 billion,
largely on charges related to its bid to write down or sell risky
mortgage assets, Reuters reported yesterday. GMAC, one of the largest
U.S. auto loan makers, recently received a $3.8 billion cash injection
from the government, the latest in a series of bailouts as the lender
has struggled to recover from the housing crisis. GMAC is taking a $3.8
billion pretax charge against fourth-quarter earnings, partly so it can
write down the value of mortgage assets to a level where they may tempt
outside investors. Executives said that they expected to now be able to
sell some mortgages from Residential Capital, its struggling home loan
arm, to third-party investors. Read
more.
Analysis: Visa, Using Debit
Card Fees, Dominates a Market
Signature debit cards dominate debit use in this
country, accounting for 61 percent of all such transactions, even though
PIN debit cards are less expensive and less vulnerable to fraud,
according to a New York Times analysis
yesterday. When consumers sign a debit card receipt at a large retailer,
the store pays the consumer’s bank an average of 75 cents for
every $100 spent, more than twice as much as when a consumer enters
their PIN number. The difference is so large that Costco will not allow
you to sign for your debit purchase in its checkout lines. Wal-Mart and
Home Depot steer customers to use a PIN, the debit card norm outside the
U.S. How this came to be is largely a result of a successful if
controversial strategy hatched decades ago by Visa, the dominant payment
network for credit and debit cards. For payment networks like Visa and
MasterCard, competition in the card business is more about winning over
banks that actually issue the cards than consumers who use them. Visa
and MasterCard set the fees that merchants must pay the
cardholder’s bank. Visa enticed banks to embrace signature debit
— the higher-priced method of handling debit cards — and
turned over the fees to banks as an incentive to issue more Visa cards.
At least initially, MasterCard and other rivals promoted PIN debit
instead. As debit cards became the preferred plastic in American
wallets, Visa has turned its attention to PIN debit too and increased
its market share even more. It has succeeded — not by lowering the
fees that merchants pay, but often by pushing them up, making its bank
customers happier. In an effort to catch up, MasterCard and other rivals
eventually raised fees on debit cards too, sometimes higher than Visa,
to try to woo bank customers back.
href='http://www.nytimes.com/2010/01/05/your-money/credit-and-debit-cards/05visa.html?em=&pagewanted=print'>Read
more.
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