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May 222007

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w:st='on'>
id='1' name='1'>Delaware Court
Rules Against Claims Directed at Company Executives

The Delaware Supreme
Court on Friday ruled that creditors of insolvent companies or companies

in the “zone of insolvency” could not file direct claims
against the companies’ directors, Bankruptcy Law360 reported
yesterday. The court affirmed the ruling of the Delaware Court of
Chancery, which found that the North American Catholic Educational
Programming Foundation Inc. (NACEPF) failed to state a claim against
three directors of Clearwire Holdings Inc., a
w:st='on'>
size='3'>Delaware
size='3'>corporation that sought to acquire the leases of radio spectrum

bands to facilitate streaming wireless Internet. NACEPF alleged that
three Clearwire directors—Rob Gheewalla, Gerry Cardinale and Jack
Daly, who also worked for Goldman Sachs & Co., Clearwire’s
main source of funding—breached their fiduciary duty to the
company’s creditors by favoring Goldman’s agenda and hiding
it from the foundation. “Directors of insolvent corporations must
retain the freedom to engage in vigorous, good-faith negotiations with
individual creditors for the benefit of the corporation,” the
Delaware Supreme Court wrote in its decision. “Accordingly, we
hold that individual creditors of an insolvent corporation have no right

to assert direct claims for breach of fiduciary duty against corporate
directors. Creditors may nonetheless protect their interest by bringing
derivative claims on behalf of the insolvent corporation or any other
direct nonfiduciary claim...that may be available for individual
creditors.” 

href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=25144'>Read

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New
Century Cleared to Sell Servicing Unit

A federal bankruptcy
judge granted New Century Financial Corp. approval yesterday to sell its

loan servicing unit to hedge fund Carrington Capital Management LLC for
$184 million, Reuters reported. Bankruptcy Judge
face='Times New Roman' size='3'>Kevin Carey
size='3'>approved Carrington's purchase at a hearing, five days after a
court-supervised auction. New Century had announced a $188 million
purchase price for the servicing unit, but that included a $4 million
credit to Carrington related to break-up fees and expenses. 

href='http://money.cnn.com/2007/05/21/news/companies/bc.newcentury.reut/index.htm?section=money_latest'>Read

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Judge

Approves Granite Broadcasting’s Reorganization Plan

A federal bankruptcy
judge has approved Granite Broadcasting Corp.’s reorganization
plan, paving the way for the bankrupt media company to exit chapter 11
under the control of hedge fund Silver Point Capital,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Under the terms of the approved plan,
Silver Point traded about $295 million in a debt-for-equity swap in
exchange for control of Granite. The plan provides that Granite’s
secured holders will receive $200 million in new secured notes, with the

balance of their debt to be converted into substantially all of
Granite’s new equity. Unsecured creditors will receive a 100
percent recovery subject to a cap of $11 million on the total amount of
all allowed unsecured claims, while the holders of preferred equity will

receive approximately 2 percent of the new equity and warrants and the
holders of common stock will receive a pro rata share of 1 percent of
Granite’s new equity plus warrants. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=25181'>Read

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name='4'>Worker Outrage Could Snarl Northwest's Chapter 11
Exit

Northwest management
continues to be at odds with its unions as deep cuts in wages and
benefits — some negotiated, some imposed by management —
make improved relations unlikely,

size='3'>USA Today reported yesterday. In the
last month, employees' resentment has been stoked to unprecedented
levels by the disclosure of a nearly $300 million incentive compensation

plan for the airline's top executives that workers call outrageous. Now,

Northwest must convince passengers and Wall Street that it can deliver
smooth service and profits despite vocal, angry unions. Bankruptcy
Judge Allan
Gropper approved Northwest's proposed
reorganization plan on Friday. Upon its exit from chapter 11 next week,
it will be the fourth big
w:st='on'>
size='3'>U.S.
size='3'>carrier to finish bankruptcy reorganization since the 9/11
attacks. Secured creditors will be repaid in full, unsecured creditors
will get stock in the reorganized company worth 66 cents to 83 cents on
the dollar of what they're owed, and the company's existing shares will
be canceled. 

href='http://www.usatoday.com/money/industries/travel/2007-05-20-northwest-workers-bankruptcy_N.htm?csp=34'>Read

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name='5'>Diamond Wholesaler Receives Extension to File
Reorganization Plan

Judge
face='Times New Roman' size='3'>Stuart M. Bernstein
size='3'>has granted M. Fabrikant & Sons' request for more time to
file its reorganization plan,
size='3'>Bankruptcy Law360 reported yesterday.

The extension will give the wholesale jeweler until July 16 to file its
reorganization plan and Sep. 15 to solicit votes from its creditors.
Meanwhile, Fabrikant’s executives prepared for the auction of
assets scheduled yesterday and for the sale hearing now scheduled for
June 19.
size='3'>Fabrikant filed for chapter 11 on Nov. 17, 2006, citing the
bankruptcies of its largest customers and a decline in business from
Wal-Mart Stores Inc. The case is
size='3'>M. Fabrikant & Sons Inc. and Fabrikant-Leer International
Ltd., case number 06-12737, in the U.S.
Bankruptcy Court for the Southern District of New York. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=25183'>Read

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name='6'>Creditors Object to
w:st='on'>
size='3'>Sale of Collins
& Aikman Units

Collins & Aikman
Corp. may encounter trouble selling off its carpet and acoustics
business after the company’s creditors filed five different
objections against the move on Friday, Bankruptcy Law360 reported
yesterday. In a filing in the U.S. Bankruptcy Court for the District of
Eastern Michigan, the company said that International Automotive
Components Group North America Inc. would buy its automotive flooring
and acoustic components business for about $134 million. The sales
agreement also allows for the company’s senior secured lenders to
invest in IAC up to an aggregate cap of 25 percent of the
company’s outstanding stock. Ace American Insurance Co., who has
issued various insurance policies to Collins & Aikman and its
subsidiaries, filed a limited objection saying that several of the terms

in the asset-purchase agreement were “very broad and could include

the Ace policies.” Creditor General Electric Capital Corp. also
filed a limited objection because it was “unable to determine with

certainty whether and which of GECC’s assets, contract and leaser
are included in the proposed sale and what consideration GECC will
receive from the sale if they are.” 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=25162'>Read

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name='7'>Trucking Firm's Former CEO Pleads Guilty to Bankruptcy
Fraud

The former head of a
Dubuque, Iowa-based trucking company has pled guilty to two counts of
bankruptcy fraud, the Associated Press reported yesterday. Roger
Waldner, former CEO and owner of H&W Motor Express, faces up
to 10 years in prison and up to $500,000 in fines. Waldner was
indicted on 12 fraud counts last May for driving the 74-year-old company

into bankruptcy, including lying to creditors on his bankruptcy
petition. He reached a plea deal today, just before trial was to begin
in U.S. District Court in
w:st='on'>Cedar
Rapids. A sentencing
hearing is not expected for several months. 
href='http://www.kwqc.com/Global/story.asp?S=6547894&nav=7k7U'>Read
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name='8'>Commentary: Side Deals in a Gray Area

While regulators have
focused on the buying of options or stocks on leaks about deals before
they become public, there is another, more subtle way that big investors

can trade while possessing information that the market does not have,
the New York
Times reported today. This little-known leeway

comes in the form of “big-boy letters” that are typically
used when an investor has confidential information about a stock or bond

and wants to sell those securities. By signing the letter, the buyer
effectively recognizes that the seller has better information but
promises not to sue the seller, much like a homebuyer who agrees to buy
a house in “as is” condition. Lawyers agree that big-boy
letters do not technically shield either party from insider trading
laws, but rather protect the two parties from suing each other. Still,
the letters are widely used and have not — until now — been
legally challenged. (The Securities and Exchange Commission has not
weighed in on the letters.) “With big-boy letters, we have a
situation where the public at large can be exposed to tainted claims
without knowing about it,” said Edward S.
Weisfelner, the chairman of the bankruptcy and corporate
restructuring practice group at the law firm of Brown Rudnick. 

href='http://www.nytimes.com/2007/05/22/business/22bigboy.html?_r=1&oref=slogin&pagewanted=print'>Read

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High Court Raises Bar for Antitrust Lawsuits
id='9' name='9'>

Aiming to rein in the
high cost of antitrust litigation, the Supreme Court, in a 7-2 opinion,
ruled that an allegation that two or more companies are acting in
parallel isn't enough for an antitrust lawsuit to proceed, the
Wall Street Journal
reported today. Even if the result benefited the
companies and diminished competition, the plaintiffs must go further and

include some allegation indicating that the companies were actively
working together.
size='3'>When independent self-interest also could explain the conduct,
Justice David Souter wrote for the court, plaintiffs must allege 'some
factual context suggesting agreement' to restrain trade. But in throwing

out the suit alleging that major telecom companies conspired to restrain

trade, the court noted that the plaintiffs failed only because they
'have not nudged their claims across the line from conceivable to
plausible.' While the ruling doesn't radically upend the rules for
antitrust actions, it marks the latest in a sequence of cases where the
court has tightened the scope of the Sherman Antitrust Act, the 1890
statute that took aim at monopoly by outlawing any 'contract,
combination ... or conspiracy in restraint of trade or
commerce.' 

href='http://online.wsj.com/article/SB117975608272309469.html?mod=hpp_us_at_glance_most_pop'>Read

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