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August 21, 2006
id='1'>Commentary: Bankruptcy Reform Gave Creditors Too
Much
Under BAPCPA, fewer
low-income debtors will file for bankruptcy because they cannot afford
the high costs of filing or their gain from filing is smaller, or they
are ineligible to file, according to a Washington
Post commentary today. Creditors gain because
they now have longer to collect penalty interest rates and fees and more
opportunity for garnishment of debtors' wages. Despite the new
law’s requirements, opportunistic debtors can still use trusts to
shelter assets in bankruptcy and BAPCPA provides a new bankruptcy
exemption for up to $1 million of assets in tax-sheltered individual
retirement accounts ($2 million for married couples who file).
Opportunistic debtors can also pass the means test and qualify for
chapter 7 even if they have high incomes, by spending more on categories
that increase their consumption allowances.
href='http://www.washingtonpost.com/wp-dyn/content/article/2006/08/19/AR20060…'>Read
more.
id='2'>Commentary: Bankruptcy Reforms Not Benefiting
Consumers
After almost a year under
the new bankruptcy law, it appears that the reforms implemented last
year seem to be benefiting the credit industry rather than protecting
consumers, according to a
size='3'>Houston Chronicle commentary on
Saturday. Pitched as consumer protection, it was passed after eight
years of political arm-twisting by credit card issuers who didn't want
to lose fees from indebted customers when they filed for bankruptcy.
'All it's done is make it more time-consuming and more complicated and,
for debtors, more expensive,' says Randy Williams , a
bankruptcy lawyer with Thompson & Knight in
w:st='on'>
size='3'>Houston
has also created a cottage industry of credit counseling, but it doesn't
differentiate among income levels. 'It's more onerous on the people that
the law ought to be there to help: the poorest people, the
least-educated people,' says Thomas Black, a local attorney and state
chairman for the National Association of Consumer Bankruptcy
Attorneys.
href='http://www.chron.com/disp/story.mpl/business/steffy/4127900.html'>Read
more.
id='3'>Northwest Appeals Bankruptcy Court Strike
Ruling
Northwest Airlines said
that it appealed a bankruptcy court decision not to block a threatened
strike by its flight attendants, Reuters reported on Friday. The No. 5
U.S. carrier, which faces a strike as early as Aug. 25, said it appealed
the ruling in U.S. District Court for the Southern District of New York.
Bankruptcy Judge Allan
Gropper on Thursday denied Northwest's request
to block a strike threatened by the Association of Flight Attendants
(AFA). In his ruling, Gropper said his court lacked the jurisdiction to
enjoin a strike. Northwest says a strike against an airline acting on
court authority would be illegal. The carrier says it has contingency
plans it could implement in the event of a strike, but it has declined
to say what those plans are.
href='http://today.reuters.com/news/articleinvesting.aspx?view=CN&symbol=&sto…'>Read
more.
Pensions
id='4'>Third Circuit: Bankruptcy Cases Should Consider Pension Plans
as a Whole
In a decision that could
have far-reaching implications if more large American companies file for
bankruptcy, the Third U.S. Circuit Court of Appeals ruled that multiple
pension plans should be considered in the aggregate for purposes of
reorganization under chapter 11,
size='3'>Delaware Law Weekly reported on
Saturday. 'The instant case raises a question of first impression among
the courts of appeal: When a chapter 11 debtor seeks to terminate
multiple pension plans simultaneously under the reorganization test,
should a court apply the test to each plan independently, or to all of
the plans in the aggregate?' Circuit Judge Marjorie O.
Rendell wrote in the opinion for In re Kaiser Aluminum
Corp . The court concluded that, in the absence of instructions
from Congress on the matter, to consider the plans in aggregate is the
most logical, equitable method. Tudge Rendell noted that in every
similar case identified, bankruptcy courts have applied an aggregate
analysis, 'apparently without protest from the Pension Benefit Guaranty
Corp.'
href='http://www.law.com/jsp/article.jsp?id=1155892476507&rss=newswire'>Read
more.
id='5'>Pension Law May Boost Corporate Borrowing, According to
Moody's
Moody's Investors Service
said that legislation aimed at shoring up
w:st='on'>
size='3'>U.S.
size='3'>companies' pension plans will likely prompt increased corporate
borrowing, but that is not likely to impact most debt ratings, Reuters
reported on Friday. The legislation signed by President Bush on Thursday
will require increased contributions from companies that have
under-funded pension plans, and they will likely borrow to close their
gaps, Moody's said in a report. Still, companies would in essence be
exchanging one form of debt for another, so the impact on ratings would
be neutral, Moody's said. Moody's also said it would look favorably on
companies that are able to fund pension obligations with low-interest,
long-term debt because liquidity and cash flow could be
improved.
href='http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&stor…'>Read
more.
id='6'>Commentary: Generations Will Feel Pension Act
Differently
The pension legislation
President Bush signed last week will make the most significant changes
to U.S. retirement laws in three decades, affecting workers of every
age, from graduates on their first job to employees who are about to
retire, according to a Washington Post commentary yesterday.
Younger workers ages 20 to 35 may be the biggest winners under this bill
as they will find it easier to participate in 401(k) plans. The new law
encourages employers to offer automatic enrollment, allows for
contributions to automatically increase as pay increases, and makes it
possible to automatically diversify holdings. The nonprofit Employee
Benefit Research Institute estimates that automatic enrollment will
result in a 92 percent participation rate, compared with today's 66
percent. Middle-aged workers 35 to 60 will be helped by efforts to shore
up traditional pensions, in which they are more likely than younger
workers to be enrolled. Workers near retirement will benefit from
receiving more information from companies about the health of their
pension plans and mandates on companies to put more money into
underfunded pensions.
href='http://www.washingtonpost.com/wp-dyn/content/article/2006/08/19/AR20060…'>Read
more.
w:st='on'>
id='7'>New York
face='Times New Roman'
size='3'> Gets Sobering Look at Its
Pensions
A close inspection
of
City
that the funds committed to the plans may fall well short of the
city’s promises to hundreds of thousands of current and retired
workers, the New York
Times reported yesterday. Every year since
1999,
size='3'>has reported that its public pension plans have been fully
funded. They look
fully funded chiefly because the city has been using an unusual pension
calculation that does not comply with accepted government accounting
rules. Even the city’s chief actuary, Robert C. North, who helps
produce the annual reports, says the official numbers are
“meaningless” when it comes to showing the plans’
financial health. North has prepared a little-noticed set of
alternative calculations showing that the gap in the pension funds could
be as wide as $49 billion which is nearly the size of the
city’s entire annual budget and the equivalent of the city’s
publicly disclosed outstanding debt.
href='http://www.nytimes.com/2006/08/20/nyregion/20pension.html'>Read
more.
Firms
Ready for Heavier Bankruptcy Caseload in 2007
Despite what's expected
to be a 12-year low in bankruptcy filings this year, major U.S. law
firms are starting to beef up their ranks of restructuring attorneys in
anticipation of heavier caseloads next year, the
face='Times New Roman' size='3'>National Law Journal
size='3'>reported today. Companies in the automotive,
telecommunications, retail and health care industries are most likely to
encounter trouble, bankruptcy experts said. New York-based Skadden,
Arps, Slate, Meagher & Flom plans to add as many as 35 bankruptcy
lawyers over the next 14 months, said Greg Milmoe, a co-head of that
firm's restructuring group. Skadden currently has 85 such attorneys,
down from a peak of 120 at the end of 2003. The restructuring practices
of Chicago's Jenner & Block; New York-based Weil, Gotshal &
Manges; Chicago's Kirkland & Ellis; Akin Gump Strauss Hauer &
Feld; Sonnenschein Nath & Rosenthal; and New York's Milbank, Tweed,
Hadley & McCloy all said that they're hiring or seeking to pull in
more attorneys from other groups in their firms. They're generally
looking to boost the head count by 10 percent to expand the practices
and replace lawyers who defected to investment banks, hedge funds or
smaller firms.
href='http://www.law.com/jsp/article.jsp?id=1155892472065&rss=newswire'>Read
more.
id='9'>Commentary:
face='Times New Roman'
size='3'>Michigan
Asbestos Suits
The
w:st='on'>
size='3'>Michigan
court recently issued a surprising administrative order, outlawing the
bundling of asbestos cases for collective settlement or trial, according
to a Wall Street
Journal editorial today. The
w:st='on'>
size='3'>Michigan
in a 4-3 decision, ordered that from now on 'each case should be decided
on its own merits.' Courts around the country have been creating
'inactive' dockets, where they are parking the suits of healthy
claimants -- that is, people who say they've been exposed to asbestos
but show no signs of impairment. Bankruptcy courts are also cracking
down on certain 'prepack' filings designed to loot insurers and hand the
proceeds to the lawyers. And individual judges -- perhaps inspired by
the scathing silicosis opinion last year of federal Judge Janis Graham
Jack -- are increasingly demanding more evidence that patients really
are sick.
href='http://online.wsj.com/article/SB115611442956340543.html?mod=opinion_mai…'>Read
more. (Registration required.)
id='10'>Adelphia Noteholders Want End to Exclusivity
Adelphia Communications
Corp. noteholders are seeking an end to the company’s exclusivity
and demanding the chance to contribute to its reorganization
plan, Portfolio
Media reported on Friday. The noteholders
argue that the plan to pay off creditors is biased, favoring some
creditors at the expense of the noteholders, according to court filings.
The Adelphia noteholders have also requested that certain court
documents be unsealed, arguing that transparency and creditor
participation will help the company emerge from bankruptcy. A hearing to
consider the motion is set for Sept. 12, and objections are due by Sept.
8.
Airlines
id='11'>Delta’s Bid to Toss Pensions Comes under
Fire
Weeks after Delta Air
Lines asked a federal bankruptcy court for approval to terminate its
pilots’ pension plans, a group of retired pilots is lashing out
against the bid, saying the embattled carrier is trying to avoid its
obligation to pay settlement proceeds, Portfolio
Media reported on Friday. Attorneys
representing a group comprising an estimated 2,700 retired pilots said
Delta “should not be allowed to use a distress termination of the
pilot plan to wash their hands of obligations that they knowingly,
willingly and voluntarily undertook” when the airline agreed to a
class action settlement last September. The U.S. District Court for the Northern District of
Georgia approved that settlement last year after the group brought suit
in 2001, claiming that Delta and the pilots union had illegally
determined the amount of their retirement payments in violation of the
Employee Retirement Income Security Act (ERISA). A hearing on Delta's
motion is scheduled for Sept. 1.
id='12'>Mesaba Airlines Contract Talks Stalled
Mesaba Airlines, the
regional carrier for Northwest Airlines, is in a stalemate with its
workers over $17 million in wage and benefit concessions the company
says it needs to emerge from bankruptcy court, the
face='Times New Roman' size='3'>Detroit News
size='3'>reported today. Last month, a judge ruled that Mesaba could
throw out agreements with its three largest unions and impose its own
contract terms if the airline gives 10 days' notice first, a move
intended to provide one last chance for the company to make a deal with
its 3,300 workers. Mesaba, however, has not given notice, and bargaining
remains at a standstill. Union leadership said the cuts are unacceptable
and the reduced wages would amount to slave labor. They vow to strike or
quit en masse if the company imposes the contracts.
href='http://www.detnews.com/apps/pbcs.dll/article?AID=/20060821/BIZ/608210355'>Read
more.
id='13'>Tower Records to Seek Buyer While in
Bankruptcy
w:st='on'>
size='3'>Music
face='Times New Roman' size='3'>retailer
size='3'>Tower
size='3'>Records, which put itself up for sale earlier this year, said
it would seek a buyer while under chapter 11 protection and aimed to
complete a sale before the crucial holiday shopping season, Reuters
reported yesterday. Tower, which operates 89 stores that sell music and
movies, said it got $85 million in debtor-in-possession financing that
will allow it to fund its operations and purchase new products. The
Sacremento,
face='Times New Roman' size='3'>Calif.-
based company, which is owned by privately held MTS Inc.,
emerged from a previous bankruptcy reorganization in 2004.
href='http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&stor…'>Read
more.
w:st='on'>
id='14'>Oneida
size='3'> Asks for Exclusivity Extension
Flatware maker Oneida
Ltd. filed a motion on Thursday asking to retain exclusive control over
its bankruptcy case for 45 more days, Portfolio
Media reported Friday.
w:st='on'>Oneida
asked Judge
size='3'>Allan L. Gropper of the U.S.
Bankruptcy Court in
w:st='on'>
size='3'>Manhattan
extend its exclusivity period through Oct. 15, according to court
documents. The company already filed its chapter 11 reorganization plan
with the court, but the judge’s confirmation is still
pending.
face='Times New Roman' size='3'>Oneida
is seeking an extension in case the plan is not confirmed
and the company’s exclusivity period ends on Aug. 31.
size='3'>Oneida
Gropper to approve its lease of a warehouse distribution and office
facility in
w:st='on'>
size='3'>Georgia
size='3'>, which would become effective on Nov. 1. A hearing on the
matter will be held on Aug. 31.
id='15'>6,300 at
Company
Auto-parts maker
size='3'>Delphi
workers at the company’s second-largest union, or 83 percent of
those eligible, have chosen to leave through retirements or buyouts,
Reuters reported today. Delphi spokesman Lindsey Williams said that
workers would depart through the rest of 2006 under the program,
leaving
size='3'>Delphi
workers represented by the electrical workers union. About 3,200 members
of the electrical workers union were eligible for retirement or
preretirement incentives, and all 7,500 were eligible for buyouts that
included lump-sum payments to sever ties.
w:st='on'>
size='3'>Delphi
hourly workers when it filed for bankruptcy in October last year. The
auto workers represented 24,000 workers, and the electrical union
8,500.
href='http://www.nytimes.com/2006/08/19/business/19delphi.html?pagewanted=pri…'>Read
more.
id='16'>Ford Unveils Plan for Sweeping Cuts in 2006
Production
Ford Motor Co.,
accelerating its restructuring amid slumping demand for trucks and
sport-utility vehicles, unveiled sweeping production cuts in the United
States and Canada that will partially shut down at least 10 plants that
employ more than 20,000 people for the rest of the year, the
Wall Street Journal
reported today. The move to cut 21 percent of its North
American production -- about 168,000 vehicles -- signals a growing
recognition by Chairman and Chief Executive Bill Ford Jr. that the No. 2
U.S. automaker faces a painful retrenchment that will leave it
substantially smaller and less United States-focused. As Ford sheds jobs
in the United States, it is expanding operations
and purchasing in new markets such as
w:st='on'>
size='3'>China
Ford also is contemplating thousands of salaried job cuts, benefit cuts
and more plant shutdowns.
href='http://online.wsj.com/article/SB115590646604639332.html?mod=us_business…'>Read
more. (Registration required.)
id='17'>Turner-Dunn Files Chapter 11 Bankruptcy
w:st='on'>
size='3'>Phoenix
Turner-Dunn, which has shut down and left many homes in Casa Grande and
Maricopa unfinished, filed for chapter 11 protection this week,
Tri-ValleyCentral.com reported on Friday. The action came after Ohio
Savings Bank filed a $23 million lawsuit in
w:st='on'>
size='3'>Pinal County
size='3'>Ariz.
Court Aug. 8 initiating a foreclosure and auction proceedings on
Turner-Dunn's roughly 450 housing lots. The lots had been used as
collateral for millions of dollars in loans and credit lines. Total
debts of at least $22 million were listed to about 100 creditors,
including lenders, subcontractors and other businesses, through
bankruptcy filings for five Turner-Dunn companies owned or controlled by
Marcus Dunn and involved in
w:st='on'>
size='3'>Pinal
face='Times New Roman'
size='3'>County
size='3'>construction projects.
href='http://www.zwire.com/site/news.cfm?newsid=17084215&BRD=1817&PAG=461&dep…'>Read
more.
International
id='18'>Eurotunnel Preparing to Dispatch Creditor
Invitations
In a precedent-setting
move under
w:st='on'>
size='3'>France
size='3'>’s revised safeguard procedure, the administrators of the
embattled channel tunnel operator are planning to invite creditors to
join a bank debtholder committee, Portfolio
Media reported Friday. Eurotunnel received a
break on Aug. 2 after the Parisian court approved a stay from creditors
under the country’s safeguard procedure, the French equivalent
of
face='Times New Roman'
size='3'>U.S.
size='3'>chapter 11 protection. All creditors holding bank debt as of
that date will be invited to join the committee representing bank debt
creditors. Previously, institutional investors that bought their claims
in the secondary market from original licensed bank lenders were barred
from the committee. The bank creditors’ committee could play a
crucial factor in the company’s restructuring, since the body
would have to approve any restructuring of Eurotunnel's £6.2
billion ($11.5 billion) debt by a two-thirds majority. Under the French
bankruptcy system, which was revamped in January 2006, the creditors
could face a stay of up to 18 months and a freeze on asset and interest
payments.
id='19'>Female Bankruptcy Levels Increasing in the
w:st='on'>
size='3'>United
Kingdom
According to a survey
fielded by accounting firm Wilkins Kennedy, proportion of female
bankruptcies in the
w:st='on'>United
Kingdom
increased from 42 to 44 percent over the past year, the
face='Times New Roman' size='3'>London Guardian
size='3'>reported today. Since 2002, the survey showed that the figure
has risen from 32 to 42 percent. Keith Stevens, insolvency partner at
the firm, said if the trend continues at the current rate, half of all
people in the United Kingdom going through the bankruptcy
process will be women by the end of the decade. Stevens said the problem
stemmed from the fact that women's salaries have failed to keep up with
their need to be financially independent. Research by Halifax shows the
proportion of new mortgages taken out by single women has more than
doubled in the last 20 years and now accounts for 23 percent of the
total market.
href='http://money.guardian.co.uk/creditanddebt/debt/story/0,,1855058,00.html…'>Read
more.
id='20'>BioEnvelop Technologies to File for
Bankruptcy
Canada's BioEnvelop
Technologies Corp. has disclosed plans to file for bankruptcy after
announcing the resignations of all of its board members, the
Montreal Gazette
reported on Saturday. The Montreal-based technology firm
says it filed a notice of intention under the Bankruptcy and Insolvency
Act. Andre Giroux Conseils Inc. has been named as its trustee. Founded
in 1998, BioEnvelop develops, manufactures and markets commercial drug
products, including the Longevita coating, a biodegradable and edible
protein-based coating treatment that prolongs shelf life and inhibits
humidity transfer in fresh and frozen food products.
size='3'>
href='http://www.canada.com/montrealgazette/news/business/story.html?id=dcf7b…'>Read
more.
href='http://www.canada.com/montrealgazette/news/business/story.html?id=dcf7b…'>