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August 18, 2008
Judge Spurns Countrywide Deal with
Pennsylvania Trustee
Days after the U.S. Trustee's office lodged a protest, Bankruptcy Judge
Thomas Agresti on Thursday rejected a proposed deal
reached between Countrywide Financial Corp. and Pennsylvania over the
lender's allegedly abusive practices in the state, Bankruptcy
Law360 reported on Friday. Last month, Countrywide agreed to pay
$325,000 to Ronda Winnecour, the Chapter 13 trustee for the district of
Western Pennsylvania, to put to rest charges of abusive practices in
nearly 300 mortgage loans presided over by the Pennsylvania court. The
U.S. Trustee's office balked at the tentative deal, maintaining that the
agreement has the potential to hinder the trustee's larger
investigation. A status conference on the matter has been scheduled for
Oct. 2. Read
more. (Subscription required.)
Alabama County Facing Largest
Municipal Bankruptcy Filing
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/08/15/AR2008081502412_pf.html'>
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Alabama's Jefferson County appears headed for the biggest municipal
bankruptcy in U.S. history, burdened by a $3.2 billion debt from a sewer
project started in 1996, the Associated Press reported on Friday.
Politicians in Jefferson County, which has 658,000 residents and
includes the state's biggest city, Birmingham, are struggling to find a
way out of the jam, but they have mostly abandoned talk of raising taxes
and fees after running into fierce opposition at public meetings. On
Thursday, with their options running out, the county commissioners
decided to let the voters weigh in on Election Day with a nonbinding
referendum on whether to file for bankruptcy. A bankruptcy filing by
Jefferson County would shatter the previous record of $1.7 billion, set
by Orange County, Calif., in 1994.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/08/15/AR2008081502412_pf.html'>Read
more.
Report: PBGC Downplaying Investment
Plan Risks
The Government Accountability Office said in a report released today
that the Pension Benefit Guaranty Corp. (PBGC) has understated the risks
of its new investment policy, the Associated Press reported. The PBGC
said earlier this year that it would take a more aggressive investment
approach by investing more in stocks and adding new alternative
investments, such as real estate and private equity funds. The agency,
which has assets of $68 billion, hopes the strategy will help it close a
$14 billion gap between those assets and its liabilities. The PBGC has
said its new approach will reduce risk because it will result in a more
diversified portfolio of 45 percent stocks, 45 percent bonds, and 10
percent in alternative investments. The GAO, however, said that under
certain scenarios the new strategy would have more volatile results than
the old approach. As an example, the report said that funds allocated to
private equity may not be returned for up to seven years.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/08/18/AR2008081800538_pf.html'>Read
more.
Bankrupt California City Losing Cops
Amid Rising Crime
Three months after it became the largest California city to declare
bankruptcy, the city of Vallejo is facing an exodus of police officers
as residents grow anxious about a surge in robberies and other crimes,
the Sacramento Bee reported yesterday. Vallejo filed for
chapter 9 protection in May blaming its fiscal woes on shrinking tax
revenue and escalating costs for police and firefighters. Now a growing
number of officers are helping to reduce the city's payroll expenses -
by leaving the police department. About 25 of its 150 officers have
retired or left for other law enforcement agencies over the past year,
and at least 18 more are in the process of applying for jobs elsewhere
in Northern California, where cops are in high demand, according to Lt.
Richard Nichelman, a department spokesman.
href='http://www.fresnobee.com/384/v-printerfriendly/story/803457.html'>Read
more.
Cookie Chain Mrs. Fields to File for
Bankruptcy
Cookie retailer Mrs. Fields Famous Brands LLC said on Friday that it
plans to file for chapter 11 protection to help restructure its
business, according to a U.S. Securities and Exchange Commission filing,
Reuters reported. The company, which licenses and franchises about 1,200
Mrs. Fields Cookies and TCBY frozen yogurt locations worldwide, has
begun soliciting votes from creditors for a prepackaged reorganization
plan. More than two-thirds of its bondholders have agreed to vote in
favor of the prepackaged plan, though their support is contingent upon
the company submitting its bankruptcy filing to the court by Aug. 25,
according to the regulatory filing.
href='http://news.yahoo.com/s/nm/20080815/bs_nm/mrsfields_bankruptcy_dc_3=1;_ylt=AtSEUnVwPk1GBXjhuZ_JqZyb.HQA'>Read
more.
Linens 'n Things Looks to Exit
Bankruptcy Early Next Year
Linens 'n Things, struggling to survive a tough retail climate, has
devised a turnaround plan to emerge from bankruptcy early next year, the
New York Post reported today. Under pressure to stabilize its
business as bondholders threaten it with liquidation, the
home-furnishings retailer met with its key suppliers late last week to
drum up support for a new turnaround plan. Current management, under the
direction of turnaround advisory firm Conway, Del Genio, Gries &
Co., plans to return Linens 'n Things to an 'everyday, low price' model
it had pursued during its earlier years as a public company. Linens 'n
Things aims to boost its cash flow during the crucial fall and holiday
seasons with a $100 million letter of credit.
href='http://www.nypost.com/php/pfriendly/print.php?url=http://www.nypost.com/seven/08182008/business/linens_weaves_plan_to_exit_bankruptcy_in_124974.htm'>Read
more.
In related news, Linens 'N Things received approval to shutter 57
underperforming stores in addition to the ones it announced it would
close when it filed for bankruptcy in May, pushing the number of stores
the home products retailer will close up to 177, Bankruptcy
Law360 reported on Friday. Bankruptcy Judge Mary
Walrath signed off Thursday on an order approving the
liquidation agreement and sale, ruling that the store closings were
in the best interest of the debtors' estate.
href='http://bankruptcy.law360.com/articles/66273'>Read more.
(Subscription required.)
Justice Department Selects Trustee to
Run Pappas Telecasting
The U.S. Trustee's office has named E. Roger Williams to serve as
chapter 11 trustee for Pappas Telecasting Inc. to run the TV station
during the company's bankruptcy proceedings, Dow Jones Daily
Bankruptcy Review reported today. Fortress Investment Group, the
company's top lender, sought the appointment of an independent trustee
early in the bankruptcy case, blaming the company's owner, Harry Pappas,
for the lack of progress in selling TV stations to pay off a $324
million loan. The lender's request faced no opposition from the company
and was approved Aug. 5 by Bankruptcy Judge Peter
Walsh. Judge Walsh instructed the federal monitor in the case,
acting U.S. Trustee Roberta A. DeAngelis, to name a
chapter 11 trustee to run the company. Williams will review the
company's bankruptcy financing, sale plans and other key elements of the
company's operations.
Insurers Object to Treatment under
Fedders' Reorganization Plan
Fedders Corp.'s proposed joint liquidation plan has drawn the ire of
several insurance companies that claim that the plan shouldn't be
confirmed because it impinges on the insurers' contractual rights,
Bankruptcy Law360 reported on Friday. Insurers, including ACE
Property and Casualty Insurance Co., filed an objection Wednesday to the
liquidation plan as it was modified on July 15. Maryland Casualty
Company and Liberty Mutual Insurance Co. lodged a separate plan
objection Wednesday, and ACE American Insurance Co. and ESIS Inc. filed
a limited objection. ACE and Century Indemnity argue that while the plan
seems to rely on the proceeds of insurance agreements to satisfy some
claims, it doesn't provide acceptable treatment of those agreements and
insurers' claims. The objection claims that the plan would require the
continued enforceability of insurance polices that would cover claims
against the debtors, but rob the insurers of their ability to fully
enforce their contractual rights and the debtors' reciprocal contractual
obligations.
href='http://bankruptcy.law360.com/articles/66271'>Read more.
(Subscription required.)