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January 28, 2010
Bill Aims to Add Bankruptcy
Judges
With bankruptcy courts facing a
mounting stack of increasingly complex cases, the U.S. House of
Representatives is considering a bill that would add 25 permanent judges
to the bankruptcy bench, Bankruptcy
Law360 reported yesterday. Under the Bankruptcy Judgeship
Act of 2010, a bipartisan bill introduced on Tuesday by Rep. Steve Cohen
(D-Tenn.), 13 new bankruptcy court judgeships would be created while 22
temporary judgeships would be made permanent. In addition, the
legislation would authorize the extension of two temporary judgeships by
an additional five years. H.R. 4506 reflects a February 2009 request by
the Judicial Conference of the United States.
href='http://bankruptcy.law360.com/print_article/145882'>Read
more. (Subscription required.)
Bankruptcy Judge
Approves Flying J Merger with Pilot Travel
Bankruptcy Judge Mary Walrath signed an order
approving the merger of bankrupt truck stop operator Flying J Inc. with
private equity-backed Pilot Travel Centers LLC (PTC), the Deal
Pipeline reported yesterday. Judge Walrath signed the order after
issues involving the continued distribution of fuel to Flying J from
Houston oil and gas titan ConocoPhillips were resolved. Debtor counsel
Adam Paul of Kirkland & Ellis LLP in Chicago confirmed that the
latest enterprise value for Flying J going into the merger was $1.189
billion. When combined with PTC, whose enterprise value is $3.3 billion,
the new entity will carry an enterprise value of about $4.5
billion.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005382780'>Read
more. (Subscription required.)
Trustee Recovers $220
Million from Family of One of Madoff's Top Clients
The family of one of Bernard Madoff's top clients
agreed to pay $220 million to settle claims by the trustee liquidating
the Ponzi schemer's investment firm, increasing the sum available for
Madoff victims, Reuters reported yesterday. Trustee Irving Picard
announced the settlement with two children of Norman Levy, a prominent
New York real estate investor who prior to his September 2005 death at
age 93 was a longtime Madoff friend and a client for roughly three
decades. Picard said yesterday that he has recovered close to $1.5
billion, including the $220 million. The latter sum is one of Picard's
largest recoveries from a former Madoff client.
href='http://www.reuters.com/article/idUSN2712821420100127'>Read
more.
Bankruptcy Judge Sides with Lehman over Investors
in CDO Case
Lehman Brothers Holdings Inc. won the latest round in a legal battle
that spans courts in the U.S and the U.K., and pits the investment bank
and its creditors against derivatives investors, Dow Jones Daily
Bankruptcy Review reported yesterday. Bankruptcy Judge James
Peck on Monday granted summary judgment to Lehman, ruling that a
contract that allows investors to move ahead of the bank to grab assets
backing a structured debt deal called Dante violates U.S. bankruptcy
law. The decision, which Peck acknowledged 'may be a controversial one,'
could force investors in other complex derivatives transactions to forgo
billions of dollars in collateral. It also conflicts with an English
High Court ruling last year that put the investors ahead of Lehman in
the order to be repaid. Peck, in his decision, said 'flip clauses' in a
securitization contract giving investors in the collateralized debt
obligation (CDO) priority over a counterparty that defaults because of
bankruptcy 'are unenforceable and violate the ipso facto
provisions of the Bankruptcy Code.'
href='https://www.fis.dowjones.com/News/News.aspx?ProductIDFromApplication=1003&SIDFromApplication=29760B21-A052-4257-8A94-25E448BDB530'>Read
more. (Subscription required.)
U.S.
Trustee Objects to WaMu Investor's Committee
Request
Acting U.S. Trustee Roberta A. DeAngelis
objected on Tuesday to Black Horse Capital Management LLC's
request to reconstitute a committee of equity holders in Washington
Mutual Inc.'s bankruptcy case by making the committee include only
preferred stock holders, Bankruptcy Law360 reported yesterday.
'Given that a majority of the equity committee's representatives hold
preferred shares, it is unclear why Black Horse believes that the equity
committee does not adequately represent the interests of preferred
holders,' the objection said. An attorney representing Black Horse said
the makeup of the equity committee is still an open question, and the
investor has been under the impression that it includes many common
stock holders.
href='http://bankruptcy.law360.com/print_article/145790'>Read
more. (Subscription required.)
Drawing Congressional
Fire, Geithner Backs Rescue of AIG
U.S. Treasury Secretary Timothy F. Geithner defended
the bailout of the American International Group again yesterday to a
group of representatives who were skeptical of his explanations, the
New York Times reported today. Yesterday's hearing was convened
after the House Oversight Committee
lang='EN'>’s Ranking Member, Rep. Darrell
Issa (R-Calif.), obtained e-mail messages that suggested the Federal
Reserve Bank of New York had prevented AIG from revealing certain facts
about the bailout in its filings with the Securities and Exchange
Commission. Geithner, who was president of the Federal Reserve Bank of
New York when the bailout began in September 2008, maintained that
the bailout was a tragic necessity, and that Congress should legislate
financial reforms to prevent another one.
href='http://www.nytimes.com/2010/01/28/business/28aig.html?adxnnl=1&ref=business&pagewanted=print&adxnnlx=1264683616-McXlHBXtbNA6GZJZWjwYuQ'>Read
more.
Bankruptcy Court Approves Tribune
Bonus Payments
Bankrupt media company Tribune Co. can pay about $45 million in
bonuses to hundreds of managers, the largest such payment in at least 12
years, after a judge overruled union objections yesterday, Reuters
reported. The owner of the Chicago Tribune and Los Angeles
Times as well as more than 20 television stations will begin paying
the bonuses next month to as many as 720 senior employees as part of its
annual incentive plan. The Washington-Baltimore Newspaper Guild opposed
the payments, which it said rewarded declining performance at a time
when the company had frozen salaries for most staff. Bankruptcy Judge
Kevin Carey approved the plan, rejecting arguments that bonuses
should not be paid entirely in cash and that many of the targets were
already met when he held hearings on the issue in September.
href='http://www.reuters.com/article/idUSN2715887120100127'>Read
more.
The Federal Reserve's policy-making arm, the Federal
Open Market Committee, said yesterday it would continue to keep interest
rates near zero for an 'extended period,' the Wall Street Journal
reported today. The slightly improved outlook suggests rate increases
are closer, though not likely until the second half of the year at the
earliest. High unemployment or slowing inflation could put off rate
increases even longer. The Fed is trying to gradually pull back from the
many programs initiated between 2007 and 2009 to stabilize the financial
system and lift the economy. On Feb. 1, officials plan to stop a number
of programs—
lang='RU'>including short-term loans to blue-chip companies in the
commercial paper market, emergency credit to investment banks and loans
of dollars overseas through foreign central banks. On March 31, the Fed
will complete its purchases of $1.25 trillion of mortgage-backed
securities. Fed officials believe that mortgage rates could rise when it
stops its purchases, but most believe it will be less than half a
percentage point and possibly not much at all.
href='http://online.wsj.com/article/SB10001424052748704094304575029140633699592.html?mod=WSJ_business_EconomyNewsBucket'>Read
more. (Subscription required.)
Nature's Gate Files for Chapter
11
Natural Products Group, owner of the Nature's Gate line of organic
shampoos and soap, filed for bankruptcy yesterday with the support of
its lenders and expects to exit chapter 11 protection within two months,
Reuters reported yesterday. Lenders holding 90 percent of the bank loans
voted in favor of the restructuring, which will cut the company's
outstanding debt by 80 percent, the company said in a statement. The
company plans to borrow up to $20 million to fund operations during its
bankruptcy. Lenders owed approximately $530 million will end up owning
85 percent of the reorganized company's equity under the restructuring
plan. They will also have a new term loan worth $125 million. Lenders
owed about $216 million under a separate loan will be allocated warrants
that will allow them to purchase up to 5 percent of the equity in the
reorganized company.
href='http://www.reuters.com/article/idUSN2722426020100127'>Read
more.
Gallery Prepares to Make Second Trip to Bankruptcy
Court
Hollywood Video chain owner Movie Gallery Inc. is
preparing to file for bankruptcy as soon as next week as the company
struggles to stay alive amid big changes in how consumers watch movies
and television shows, Dow Jones Daily Bankruptcy Review reported
today. The movie-rental chain, based in Wilsonville, Ore., could seek
chapter 11 protection from creditors as soon as Tuesday, marking the
company's second trip to bankruptcy court in just over two years. As
part of the restructuring, Movie Gallery could attempt to close about
two-thirds of its outlets - about 1,800 stores. The company previously
filed for bankruptcy in October 2007, emerging in spring 2008 with
private-investment firms Sopris Capital Advisors LLC and Aspen Advisors
LLC as its principal owners, according to regulatory filings.
Movie Gallery is currently negotiating with lenders over a pre-packaged
bankruptcy to allow the company to go through a streamlined bankruptcy
process and limit its stay in court.
Icahn Wins Court
Approval to Buy Fontainebleau
A bankruptcy court has approved investor Carl Icahn's
bid for the bankrupt, unfinished Fontainebleau Las Vegas Resort, Reuters
reported yesterday. Icahn Nevada Gaming Acquisition LLC offered the only
qualified bid for the company, topping an earlier offer from Penn
National Gaming Inc, which dropped out of the bidding. Icahn's venture
will pay $104.6 million in cash, plus forgiveness of about $45 million
in debtor-in-possession financing, according to another attorney at
Bilzin Sumberg. The cash payment is subject to customary and contractual
adjustments. The case is In re Fontainebleau Las Vegas Holdings
LLC, U.S. Bankruptcy Court, Southern District of Florida, No.
09-21481.
href='http://www.reuters.com/article/idUSN2712905920100127'>Read
more.
name='12'>Former Florida Lawyer Pleads Guilty to Ponzi
Scheme
Scott Rothstein, once a prominent Florida lawyer,
pleaded guilty yesterday to five felonies in connection with his role in
a massive Ponzi scheme, the Wall Street Journal reported today.
The former attorney, who was disbarred last year, built a prominent
75-lawyer firm in Fort Lauderdale, and he became well known in south
Florida because of his lavish spending on cars and homes, along with his
close ties to politicians in the state. Federal prosecutors have alleged
that Rothstein defrauded investors out of $1.2 billion. The focus in the
Rothstein case will now turn to identifying those who may have helped
him perpetrate the Ponzi scheme.
href='http://online.wsj.com/article/SB10001424052748704094304575029013194919020.html'>Read
more. (Subscription required.)
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