August 172009

 

The U.S. Court of Appeals

for the Ninth Circuit affirmed an earlier bankruptcy court ruling that
an above-median income debtor seeking bankruptcy relief under chapter 13

does not get to deduct a vehicle “ownership cost” for a
vehicle he owns free and clear from his projected disposable income. In
the case of Ransom v.
MBNA Am. Bank, the Ninth Circuit agreed with
the Bankruptcy Appellate Panel, based on the interpretation of 11 U.S.C.

§707(b)(2)(A)(ii)(I), to affirm the decision of the bankruptcy
court in denying the ownership cost from the projected disposable
income. 
href='http://www.abiworld.org/e-news/Ransomdecision.pdf'>Click
here to read the full opinion.

 

Failed Banks Weighing on
FDIC

Banks in the U.S. that failed in the past two years
were in far worse shape than those that collapsed during the industry's
last crisis, a looming problem for the Federal Deposit Insurance Corp.,
the
size='3'>Wall Street Journal reported today.
At three of the five banks that failed Friday, increasing the total to
77 so far this year, the financial hit to the agency's deposit-insurance

fund is expected by the FDIC to be about 50 percent of their assets. The

biggest hit on a percentage basis is coming from Community Bank of
Nevada, a Las Vegas bank with $1.52 billion in assets and an estimated
cost of $781.5 million. The failure of Colonial Bank, a unit of Colonial

BancGroup Inc. that was sold to BB&T Corp., will cost $2.8 billion,
or 11 percent of the Montgomery, Ala., bank's assets. For the 102 banks
that have collapsed in the past two years, the FDIC's estimated cost
averaged 25 percent of assets. That is up from the 19 percent rate
between 1989 and 1995, when 747 financial institutions were closed by
regulators, according to the FDIC. The agency's insurance fund already
has dipped to $13 billion, with more than 300 battered banks and thrifts

still on an undisclosed FDIC list of problem institutions. 
href='http://online.wsj.com/article/SB125046283572235251.html'>Read
more. (Subscription required.)

 

New York Attorney General
Looks to File Suit Against Charles Schwab Corp.

New York Attorney General Andrew Cuomo is expected to
file a lawsuit against Charles Schwab Corp. alleging civil fraud related

to the brokerage firm's marketing and sales of auction-rate securities,
the
size='3'>Wall Street Journal reported today.
The move has been expected since Cuomo told the San Francisco-based
company last month that it would face a lawsuit unless it agreed to a
settlement that included buying back the securities from investors who
were stuck with them when the market froze last year. No settlement has
been announced, and Schwab maintains it did nothing wrong and couldn't
have predicted the collapse in the auction-rate market. 
href='http://online.wsj.com/article/SB125047465385135733.html'>Read
more. (Subscription required.)

 

Federal Reserve Extends TALF

into 2010

The U.S. Federal Reserve and Treasury Department today

announced an extension into next year of the Term Asset-Backed
Securities Loan Facility (TALF), a key program aimed at boosting the
flow of credit to businesses and households as well as financing for the

distressed commercial real estate market, the

face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Government officials said that they would
extend TALF loans against newly issued asset-backed securities and
legacy commercial mortgage-backed securities through March 31, 2010. The

Fed and Treasury also approved an extension of TALF lending against
newly-issued commercial mortgage-backed securities through June 30,
2010, pointing out that new CMBS deals can take a significant amount of
time to arrange. They added that they don't anticipate any expansion of
the types of collateral that are eligible for TALF. 
href='http://online.wsj.com/article/SB125051411593936739.html'>Read
more. (Subscription required.)

 

AHM to Pay Execs $5 Million
to Settle Securities Suit

American Home Mortgage Holdings Inc. and its
creditors’ committee have asked for court approval of a $5 million

payment to the former directors and officers of its AHM Investment unit
as part of a settlement of a securities class action against the leaders

of the bankrupt mortgage financing firm,

face='Times
















New










Roman'

size='3'>Bankruptcy Law360 reported on Friday.

AHM and the creditors filed the joint motion for approval of the deal in

the U.S. Bankruptcy Court for the District of Delaware on Thursday. The
lender and the plaintiffs in the securities action asked the bankruptcy
court on Tuesday to allow the company's directors and officers insurance

policy to cover the settlement of the securities action, which calls for

payments of $24 million in total. The settlement will resolve any
potential claims of breach of fiduciary duty against the investment
unit's executives, Thursday's motion said. 
href='http://bankruptcy.law360.com/print_article/116708'>Read
more. (Subscription required.)

 

Republic Wins Auction for
Frontier Airlines

Republic Airways Holdings Inc. has won the bankruptcy
court auction for Frontier Airlines Holdings Inc., beating out a bid
from rival Southwest Airlines Co.,

face='Times
















New










Roman'

size='3'>Bankruptcy Law360 reported on Friday.

Republic won with a bid of $108.8 million for Frontier, and an agreement

to waive its right to $150 million in unsecured prepetition claims,
Frontier said Thursday. The $150 million waiver will boost the
distribution to general unsecured creditors by 94 percent, according to
Frontier. The airline and the creditors’ committee selected
Republic's bid over a $170 million offer from its much-larger rival
Southwest. Southwest had planned to buy up 80 percent of Frontier's
fleet and sell it within two years.
size='3'>  Republic, conversely, has said
under its plan Frontier would become a wholly owned subsidiary but
continue to operate as normal and under its own name, along with
subsidiary Lynx. 
href='http://bankruptcy.law360.com/print_article/116714'>Read
more. (Subscription required.)

 

Fifth Circuit Approves
SeaQuest Chapter 11 Claim Subordination

A federal appeals court has ruled that a $2.7 million
unsecured claim in the chapter 11 case of bankrupt underwater oil field
services company SeaQuest Diving LP and general partner SeaQuest General

Holdings LLC must be subordinated because the claim arose from the
rescission of a purchase or sale of the debtors' security,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported on Friday.

The U.S. Court of Appeals for the Fifth Circuit on Wednesday ruled that
the claim, based on a state court judgment, had the same priority as
common stock and must be subordinated to claims and interests senior to
or equal to it. The limited partners of SeaQuest Diving were members of
SeaQuest General Holdings, which managed the venture, and S&J
contributed substantially all of its corporate assets, valued at about
$6 million, in exchange for all of SeaQuest Diving's Class A shares,
which were entitled to preferential distributions under the limited
partnership agreement, the opinion said. 
href='http://bankruptcy.law360.com/print_article/116606'>Read more.
(Subscription required.)

href='http://bankruptcy.law360.com/print_article/116606'> 

Judge Approves Sealed
Objections to Charter Chapter 11 Plan

Bankruptcy Judge

face='Times
















New










Roman'

size='3'>James M. Peck on Thursday ruled to
allow all objections and supporting motions to Charter Communications
Inc.’s restructuring plan to be filed under seal,
Bankruptcy Law360 reported on
Friday. Wells Fargo Bank NA, JPMorgan Chase & Co., the Law Debenture

Trust Co. of New York, Wilmington Trust are among the many parties that
will be allowed to file their objections under seal. The unsecured
creditors’ committee, which supports the restructuring plan, as
well as Charter, will be allowed to file their answers under seal, as
well. Charter's plan has already faced a number of objections from
federal regulators, investors and lenders decrying key protections that
Paul G. Allen, the company's chairman and largest shareholder, will
receive if it is confirmed. 
href='http://bankruptcy.law360.com/articles/116734'>Read more.
(Subscription required.)

 

Massachusetts Rejects Deal
with Firm Tied to Madoff

The Massachusetts secretary of state’s office
has rejected a proposed settlement by an investment firm to repay nearly

$6 million to state investors who lost money in Bernard L.
Madoff’s fraudulent investment scheme, the Associated Press
reported yesterday. The agency was not accepting the offer from the
Fairfield Greenwich Group of New York to make full refund to nearly a
dozen investors in the state because officials were still trying to
identify all the affected investors. Massachusetts Attorney General
William F. Galvin filed a civil fraud complaint against Fairfield
Greenwich in April, saying that officials had been coached by Madoff on
how to answer federal investigators’ questions and had
misrepresented how much they knew. 

href='http://www.nytimes.com/2009/08/17/business/17madoff.html?_r=1&ref=business&pagewanted=print'>

size='3'>Read more.

 

Lyondell Wins Approval to
Amend DIP Package

Bankrupt Lyondell Chemical Co. has won court approval
to amend its $8 billion debtor-in-possession financing package over the
objections of a group of unsecured creditors and Bank of New York Mellon

Corp.,

size='3'>Bankruptcy Law360 reported on Friday.

Bankruptcy Judge

face='Times
















New










Roman'

size='3'>Robert E. Gerber issued an order
Thursday allowing the debtor to enter into a second amendment to the DIP

credit agreement to correct what Lyondell said was an error in the
agreement. The amendment will allow Lyondell to establish a base
interest rate floor on its roll-up DIP loans. It asked for permission to

make the change in July, characterizing the lack of a base rate floor as

a “scrivener's error.” However, the Bank of New York and the

unsecured creditors’ committee challenged Lyondell's assertion,
arguing that the amendment would cost the chemical company between $6
million and $18 million that could instead be doled out to
creditors. 
href='http://bankruptcy.law360.com/print_article/116683'>Read
more. (Subscription required.)

 

Delinquent Loans Rise for
Capital One

Capital One Financial Corp. continued to face rising
charge-offs and delinquencies in July, the

face='Times
















New










Roman'

size='3'>Wall Street Journal reported today.
Capital One said today that within its national lending business, 30-day

delinquencies in its U.S. card segment rose to 4.83 percent as of July
31 from 4.77 percent as of June 30, while auto-finance delinquencies
increased to 9.22 percent from 8.89 percent. Meanwhile, the charge-offs
for U.S. cards rose to 9.83 percent from 9.73 percent. Late last week,
Barclays Capital said that it expected charge-offs to rise to 9.88
percent and delinquencies to remain flat at 4.77 percent. 
href='http://online.wsj.com/article/SB125050482549336457.html'>Read
more. (Subscription required.)

 

Starfire Systems Files for

Chapter 11

Starfire Systems, amaker of high-tech polymers used in

the aerospace and automotive industries, filed chapter 11 protection on
Thursday citing $3.6 million in debt and $2.7 million in assets,
the
size='3'>Albany Times Union reported on
Saturday. Starfire currently has 19 employees. It laid off 15 full-time
and 4 part-time employees in November 2008 as it sought to cope with
what then-CEO Richard Saburro described as a “deteriorating
business climate for our products.” The largest unsecured creditor

is United Step 1 LLC, Starfire’s landlord at the Saratoga
Technology + Energy Park, which says it is owed $355,622 in back rent,
an amount that’s in dispute. 

href='http://blog.timesunion.com/business/starfire-systems-seeks-chapter-11-reorganization/14861/'>Read

more.

 

Skins Footwear Inc. Files
for Chapter 7

Shoemaker Skins Footwear Inc. filed for chapter 7
bankruptcy, citing assets of less than $50,000 and liabilities of
between $10 million and $50 million, Reuters reported yesterday. The New

Jersey-based company makes shoes with a two-part structure consisting of

an outer collapsible, interchangeable shell called its 'skin,' and an
inner orthopedic support section called the 'bone.' The case is Skins
Footwear Inc, U.S. Bankruptcy Court for the District of Delaware, No
09-12888.

 

International

href='http://global.abiworld.org/?q=news'>Click here to review
today's global insolvency news from the GLOBAL INSOLvency
site.