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March 7, 2006
id='1'>Supreme Court Will Not Hear Case Looking at Classification of
Bonds in Bankruptcy Proceedings
The U.S. Supreme Court
has refused to hear a $155 million dispute over airport lease bonds
between United Airlines and HSBC Bank in a case over whether the bonds
should be classified under federal bankruptcy law as unsecured or
secured debt, according to
size='3'>Portfolio Media yesterday. HSBC had
petitioned for certiorari after a lower court ruled that the
$155 million in bonds was unsecured debt and that United, operating
under chapter 11
bankruptcy protection, was exempt from repaying it. The Seventh Circuit
Court of Appeals had ruled that determining the status of lease
financing falls under state law. In its ruling, the appeals court
overturned a district court decision that was in favor of HSBC. United
had argued that the bonds were not tied to “true leases,”
which must be repaid if a company files for bankruptcy. Rather, the
airline said the agreements were subleases, which are loan or financing
agreements, and therefore exempt from repayment. The Seventh Circuit
based its ruling on a provision of Bankruptcy Code
face='Times New Roman'>thar states “whether a
‘lease’ is [a] true or bona fide lease or, in the
alternative, a financing ‘lease’ or a lease intended as
security, depends upon the circumstances of each case. The distinction
between a true lease and a financing transaction is based upon the
economic substance of the transaction and not, for example, upon the
locus of title, the form of the transaction or the fact that the
transaction is denominated as a ‘lease.’” The bonds in
question were tied to hangar leases at
w:st='on'>
size='3'>San Francisco
w:st='on'>
size='3'>International
w:st='on'>
size='3'>Airport
United is also involved in court proceedings over lease bonds for
airports in
size='3'>Denver
w:st='on'>Los
Angeles
w:st='on'>
York
outstanding bonds total $500 million.
id='2'>DaimlerChrysler Begs Court to Keep Amcast
Running
As auto suppliers continue to
file for bankruptcy, DaimlerChrysler rushed to keep bankrupt Amcast
Industrial Corp. operating on Friday in response to a creditor
request that the auto
parts maker be completely shut down, Portfolio
Media reported yesterday.
face='Times New Roman' size='3'>DaimlerChrysler filed an objection to
the creditor motion late last week, promising creditors that an Amcast
shutdown would, in the end, only hurt them more. 'If the debtors cease
operations, they will cease producing and shipping component parts to
DaimlerChrysler, resulting in DaimlerChrysler incurring and asserting
claims against the estate for millions of dollars in consequential
damages, dwarfing the claims of the current unsecured creditor class,'
said DaimlerChrysler in court papers. In its filing, DaimlerChrysler
argued that as the sole supplier of the company’s component
parts, Amcast is critical to operations. A shutdown would force
DaimlerChrysler to close assembly lines and lay off an estimated 10,000
people, according to the German automaker. In order to escape such a
“disaster,” DaimlerChrysler has already agreed to order its
parts from Amcast at higher prices through June 30.
Court
Approves J.L. French DIP Loan
After smoothing out
objections from its committee of unsecured creditors, J.L. French
received the green light Friday for its $50 million debtor-in-possession
(DIP) loan, Portfolio
Media reported yesterday. Earlier, frustrated
unsecured creditors of J.L. French Automotive Castings Inc. criticized
the company’s terms for its DIP loan and called for
a federal judge to
withhold final approval of the loan. Creditors were concerned that if it
was approved, the loan will undermine the rights and duties of J.L.
French and the committee, and will award DIP lenders too much control
over the chapter 11 cases. The company is authorized to use $25 million
of the loan to fund its business while in bankruptcy. Wisconsin-based
J.L. French said in court papers the company hoped to reduce its debt levels by
$300 million and remove $200 million in preferred securities from its
balance sheets. The case is
size='3'>J.L. French Automotive Castings, case
number 06-10119, in the U.S. Bankruptcy Court for the District of
Delaware.
id='4'>PlusFunds Seeks Bankruptcy Protection Due to Refco
Filing
PlusFunds Group Inc.,
a
York
fund products, on Monday filed for bankruptcy protection after some of
its assets were tied up because of Refco Inc.'s own chapter 11 filing,
Reuters reported yesterday. Upon court approval, PlusFunds intends to
sell its business to FTVentures, a private equity firm that invests in
companies providing technology and services to financial institutions.
It has $623 million of assets under management and offices in
York
w:st='on'>
Francisco
price would be $5 million, including $2 million of cash and up to $3
million of assumed obligations, a court filing shows. PlusFunds also
hired David Peress , a principal of XRoads Solutions
Group, as chief restructuring officer. Peress said that before Refco's
bankruptcy, $312 million of customer assets at PlusFunds' SPhinX Managed
Futures Fund were transferred to Refco from Refco Capital Markets, an
unregulated broker-dealer unit. The money was later moved to accounts at
other financial institutions, he said. A committee of unsecured Refco
creditors, however, opposed the transfer, and the money has now been
frozen, Peress said.
href='http://today.reuters.com/news/articleinvesting.aspx?type=mergersNews&st…'>Read
more.
Able
Laboratories Reorganization Plan Filed
Able Laboratories announced
that it filed a proposed first amended plan of reorganization and
related disclosure statement with the U.S. Bankruptcy Court, according
to BankruptcyData.com today. The plan provides for the continuation of
Able's business in order for it to complete its ongoing recall of
products and other measures required by the FDA, allowing it to
assist other government agencies with inquiries regarding Able's prior
operations and to sell any remaining assets and wind down its
operations. Under the proposed plan, claims secured by collateral or
rights of setoff and claims entitled to priority in payment will be paid
in full, to the extent they have not already been paid. The plan
provides that holders of general unsecured claims will receive a
pro-rata portion of 'available cash', as defined in the plan.
The court scheduled a hearing to consider approving the disclosure
statement on April 6, 2006.
w:st='on'>
id='6'>Arizona
face='Times New Roman'
size='3'> Bankruptcy Cases Decline in 2006
Bankruptcies in
size='3'>Arizona
to 660 in the first two months of 2006, the
w:st='on'>
size='3'>Arizona
w:st='on'>
size='3'>Republic
size='3'>reported today. According to the U.S. Bankruptcy Court District
of Arizona, bankruptcy filings hit a record 39,204 statewide last year
largely because consumers rushed to liquidate debts before a tougher law
became effective Oct. 17. 'It's going to take some time before they get
back up,' Court Clerk Terry Miller said. 'It may even take two, three,
four years.' Through February, 485 new chapter 7 cases have been filed
to liquidate debts. That compares with 3,148 the same time a year
earlier. Chapter 13 cases filed totaled 159, down from 820.
href='http://www.azcentral.com/business/articles/0307biz-talker0307.html'>Read
more.
Airlines
w:st='on'>
id='7'>U.S.
face='Times New Roman' size='3'>Trustee Asks Judge to Cut Fees in
Northwest Case
The U.S. Trustee for the
Northwest Airlines Corp. bankruptcy has asked the judge to trim down
approximately $15 million in mounting professional fees owed to
lawyers, accountants,
consultants and advisers involved in the case,
face='Times New Roman' size='3'>Portfolio Media
size='3'>reported yesterday. Even though most of the fees have already
been paid, the trustee asked the court to
“reduce any fees awarded to these applicants by a percentage
reduction pending the final resolution of these cases,” according
to an objection filed with the court. A slew of professionals have
racked up a number of fees between September 2005 and December 2005.
Cadwalader, Wickersham & Taft LLP’s counsel is owed more than
$6 million in fees. Seabury Group LLC’s financial advisers, Arnold
& Porter’s special labor counsel and Huron Consulting
Group’s accounting and restructuring consultants are each owed
more than $1 million. Otterbourg Steindler Houston & Rosen
PC’s counsel for the committee of unsecured creditors totals fees
of more than $900,000, and Ernst & Young’s auditors and
accountants have fees of more than $838,829. The trustee also requested
additional information from the applicants regarding meals,
transportation and lodging expenses.
id='8'>Dancers Force San Francisco Adult Club into
w:st='on'>
w:st='on'>Chapter
While a $66 million class
action filed by exotic dancers against Bijou-Market LLC has forced the
operator of two
face='Times New Roman' size='3'>San
Francisco
entertainment clubs into bankruptcy, a dispute over tips raises a
question of just who is taking advantage the situation,
face='Times New Roman' size='3'>the Deal
size='3'>reported Friday. Bijou-Market, a unit of Déjà Vu
Inc., filed for chapter 11 protection with the U.S. Bankruptcy Court for
the Northern District of California in San Francisco on Feb. 28 because
of the suit, which covers lost wages, tips, meal breaks, costume
reimbursement and so-called stage fees, according to a declaration filed
by Joseph Carouba, the managing member of Little Darlings of San
Francisco LLC, another Déjà Vu entity. The suit covers 2,800
dancers over a five-year period, according to debtor counsel
Michael St. James , a sole practitioner of St. James
Law PC in
face='Times New Roman' size='3'>San
Francisco
Class-action counsel received a
fee of $245,000, and $222,000 was set aside as a settlement for the
dancers. But because so few of the dancers filed a claim, they recovered
only $49,000, with the other $173,000 ordered paid to charity. He added
that the attorneys received 5 times the amount distributed to their
clients. The $66 million represents $5.06 million in wages, $2.31
million in overtime, $3.37 million in meal time breaks, $486,000 in
penalties, $750,000 in costume reimbursement and $54 million in stage
fees, which the dancers must pay the clubs to perform. In his filing,
Carouba said Market Street Cinema and La Gals only had $100,000 in
annual profit in 2005. In its bankruptcy petition, Bijou-Market listed
$1 million to $10 million in assets.
href='http://www.thedeal.com/servlet/Satellite?pagename=PENews&c=TDDArticle&c…'>Read
more.
id='9'>ProCare Automotive Seeks Bankruptcy Protection
ProCare Automotive
Service Solutions LLC has filed for chapter 11 bankruptcy protection in
preparation for its sale to Monro Muffler Brake Inc., the
Cleveland Plain
Dealer reported today. ProCare, a privately
owned firm in
face='Times New Roman' size='3'>Independence
size='3'>,
size='3'>Ohio
its 82 retail outlets will remain open and no workers will be laid off
in connection with the bankruptcy filing. The automotive maintenance and
repair provider has 406 employees, including 26 at its
w:st='on'>
size='3'>Independence
size='3'>headquarters. The company filed for chapter 11 protection on
Sunday in federal bankruptcy court in
w:st='on'>
size='3'>Cleveland
size='3'>. On Monday, Monro Muffler, based
in
size='3'>N.Y.
agreed to acquire substantially all of ProCare's assets for about $14
million in cash, subject to bankruptcy court approval and the bankruptcy
bidding process. Monro also has agreed to provide ProCare with $3.65
million in debtor-in-possession financing for working capital, pending
approval of the transaction.
href='http://www.cleveland.com/business/plaindealer/index.ssf?/base/business/…'>Read
more.
id='10'>Dana's Finance Chief Retires
Auto-parts maker Dana
Corp., which filed for chapter 11 bankruptcy protection for its
size='3'>U.S.
size='3'>operations last week, said its chief financial officer has
retired, the Associated Press reported yesterday. Robert C. Richter,
also a vice president, will continue to be available to the company as a
consultant, Dana Chairman and Chief Executive Officer Michael Burns said
in a press release. Dana, with 46,000 workers worldwide, said in January
it lost nearly $1.3 billion in the third quarter of last year while
realigning its business.
href='http://www.washingtonpost.com/wp-dyn/content/article/2006/03/06/AR20060…'>Read
more.
International
w:st='on'>
id='11'>Russian Arbitration
Court
Shipyard
The
w:st='on'>
size='3'>Murmansk Region Arbitrary
Court
suspend the bankruptcy case against navy shipyard in the closed military
zone Severomorsk on the
Peninsula
today. The chief engineer of the shipyard Vadim Churikov said to
Interfax that the court recognized the necessity to make additional
examination of the situation, due to the military significance of the
shipyard. The military shipyards in
w:st='on'>
size='3'>Murmansk
currently owe $45 million to the state budget. The representative of
the
size='3'>Murmansk
size='3'>administration told the Interfax agency that the nearby cities
and towns rely on the shipyards for survival.
href='http://www.bellona.no/en/international/russia/navy/northern_fleet/naval…'>Read
more.
id='12'>Strike Threatened over British Rail Pension
Deficit
British ministers were
urged yesterday to intervene over an estimated £600m rail pensions
deficit or face the first all-out stoppage on the network since the
General Strike in 1926, the
w:st='on'>
size='3'>London
size='3'>Independent reported today. Leaders
of the biggest unions in the industry representing 100,000 workers
united to demand a meeting with Alistair Darling, the Secretary of State
for Transport, over the issue after the Association of Train Operating
Companies, and other rail bodies refused to negotiate with them. The
rail unions RMT, Aslef and TSSA together with the engineering union
Amicus put forward four key demands yesterday including the
reorganization of about 100 funds into three for the whole industry.
Workers' leaders want one scheme for train operators, one for
infrastructure and rail engineering companies and another for other
employees, which would cover more than 345,000 staff and pensioners.
They also insist that staff contributions should be no greater than
10.56 percent, that benefits should be kept at the current level and
that the scheme should be open to new employees.
href='http://news.independent.co.uk/business/news/article349734.ece'>Read
more.
href='http://news.independent.co.uk/business/news/article349734.ece'>