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May 4, 2010
April Consumer Bankruptcy Filings Up 15
Percent over Last Year
The 144,490 consumer bankruptcies filed in April represented a 15
percent increase nationwide over the 125,618 filings recorded in April
2009, according to the ABI, relying on data from the National Bankruptcy
Research Center (NBKRC). NBKRC?s data also showed that the April
consumer filings represented a 3 percent decrease from the 149,268
consumer filings recorded in March 2010. Chapter 13 filings constituted
25 percent of all consumer cases in April, remaining unchanged from
March.
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here to view the monthly filing charts.
Tribune Seeks Exclusivity Extension
Publisher and broadcaster Tribune Co. is asking for more time to
obtain creditor approval for its exit from chapter 11 protection, the
Deal Pipeline reported yesterday. Tribune filed a reorganization
plan in April, and has the exclusive right to solicit votes on a plan
until the end of May. The owner of the Chicago Tribune, Los Angeles
Times and other media assets asked the U.S. Bankruptcy Court for the
District of Delaware on Friday, April 30, to extend the exclusive
balloting period until Aug. 8. Meanwhile, the U.S. Trustee appointed
Kenneth Klee of Los Angeles firm Klee, Tuchin, Bogdanoff & Stern LLP
as examiner to investigate the 2007 buyout of the company by Sam Zell,
which ballooned Tribune's debt load during a crushing decline in
advertising. Tribune sought bankruptcy protection in December 2008, less
than a year after going private.
Lehman Plans a Tough Fight Against Banks on
Loss Claims
Lehman started presenting evidence last week in an effort to persuade
a bankruptcy judge that Barclays PLC reaped an $11 billion windfall in a
deal for Lehman's assets just after it filed for bankruptcy,
representing just one of several legal fights Lehman's bankruptcy
administrators are preparing to wage against other banks this year, the
Wall Street Journal reported today. Bryan Marsal, Lehman's
current chief executive and the co-founder of turnaround firm Alvarez
& Marsal, has signaled he intends to get tough on banks that
collectively filed more than $50 billion in claims for losses related to
derivatives contracts. Lehman has declined to name banks it views as
making outlandish claims. However, banks making large claims include
Goldman Sachs Group Inc., Bank of America Corp., Deutsche Bank AG,
Credit Suisse Group and U.S. Bancorp. Lehman is preparing to go after
JPMorgan Chase & Co. over billions in collateral the bank demanded
in the months and days before Lehman went under.
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Goldman Sachs Group Inc. said that is facing several lawsuits by
shareholders alleging wrongdoing related to collateralized-debt
obligations (CDOs) handled by the embattled securities firm, the Wall
Street Journal reported today. The lawsuits were filed since April
22 in federal and state courts in New York, the company said in a
securities filing. Goldman, its board of directors and 'certain officers
and employees' are accused in the suits of 'breach of fiduciary duty,
corporate waste, abuse of control, mismanagement and unjust enrichment,'
according to the company. Goldman also said that the plaintiffs in a
separate shareholder lawsuit in Delaware Chancery Court related to the
firm's compensation amended their complaint with allegations 'similar to
those' in the new lawsuits. Goldman was accused of fraud by the
Securities and Exchange Commission in a lawsuit filed April 16. The SEC
claims Goldman duped investors in a CDO called Abacus 2007-AC1 by
failing to disclose that it was created with the help of hedge-fund firm
Paulson & Co., which made a profit of about $1 billion when the
investment collapsed in value.
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Borrowers Press Kickback Claim in
Washington Mutual Case
While creditors and shareholders clash in bankruptcy court over
billions left in the wreckage of Washington Mutual Bank, irked consumers
have kept up the pressure for their share of the action, Dow Jones
Daily Bankruptcy Review reported today. Homeowners who allege
they're victims of an illegal mortgage insurance kickback scheme are
demanding $2.5 billion in damages from WaMu's former parent, Washington
Mutual Inc., which is trying to settle its troubles in bankruptcy court.
The thrift's former parent says the $2.5 billion damage claim is
unsubstantiated. It wants a bankruptcy judge to toss the claim, which is
based on alleged violations of federal real estate settlement laws.
According to the lawsuit, WaMu and affiliated companies raked in $295
million over an eight-year period from companies that provided mortgage
insurance to WaMu borrowers. The money was for 'reinsurance premiums' on
mortgage insurance provided to WaMu borrowers who had too little equity
in their homes. Consumers say that the WaMu companies paid out nothing
on losses from the reinsurance during that period, showing that the
'premiums' were just unlawful referral fees, or kickbacks, in
disguise.
Payday Lenders Hope to Win Changes to
Financial Regulatory Overhaul Proposals by Blaming Banks
Facing a major change over how they conduct business, payday lenders
are ramping up their outreach against an amendment to the Senate's
revamp of the nation's financial regulatory structure,
CongressDaily reported today. The $40 billion industry
faces a tough task as it takes on Senate Banking Chairman Christopher
Dodd's (D-Conn.) bill, which would create a Bureau of Consumer Financial
Protection with rulewriting authority over their shops and enforcement
powers over larger providers. While they fight against the Dodd bill,
payday lenders face an even greater worry from an amendment from Sen.
Kay Hagan (D-N.C.) to limit borrowers to six payday loans a year, or a
maximum of 90 days of indebtedness. Hagan claims the cap is needed
because too many borrowers get hooked on a contract with a 391 percent
annual percentage rate they are unable to pay off. The industry claims
that while Hagan's amendment would reduce their business, it would not
benefit their customers because they would have to rely on more
expensive overdraft fees offered by commercial banks to cover expenses
when they are strapped for cash.
Shareholder Group Pitches Plan to Retain
Control of Visteon
A group of shareholders has presented a chapter 11 plan for Visteon
Corp. that would allow equity holders to retain 100 percent ownership of
the auto-parts maker but would pile nearly $2.2 billion in debt on the
company upon its exit from bankruptcy protection, Dow Jones Daily
Bankruptcy Review reported today. The shareholders, which hold 12.13
percent of Visteon's stock, floated their proposal in papers filed
Friday with the U.S. Bankruptcy Court in Wilmington, Del., as part of
their fight against other bankruptcy-exit plans that would wipe them
out. Visteon's proposed plan 'significantly understates the true value
of the company, and accordingly, wrongfully extinguishes existing
shareholder value and is therefore unconfirmable,' the stockholders said
in court papers. The shareholder group presented its own valuation for
Visteon that found the company is worth at least $233 million more than
what it owes. That additional value should be left for existing equity
holders, the shareholders said.
Freedom Communications Exits Bankruptcy
Protection
Media company Freedom Communications has emerged from chapter 11
protection, the Associated Press reported yesterday. Creditors led by
JPMorgan Chase have cut Freedom's debt by nearly 60 percent to $325
million in return for control of the company. Among those getting a
stake is Angelo, Gordon & Co., a firm that recently gained shares of
newspapers in Minneapolis and Philadelphia through bankruptcy cases.
Freedom Communications owns the Orange County Register in
California, more than two dozen other dailies and eight TV stations. It
filed for bankruptcy protection in September amid steep advertising
declines.
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Simon Bids Again for All of General
Growth
Simon Property Group Inc. has offered to buy all of General Growth
Properties Inc. for $18.25 per share, even as its bid to purchase a
minority stake in its rival was rejected, Reuters reported yesterday.
General Growth said in a court filing yesterday that it had accepted a
recapitalization plan from Brookfield Asset Management over the Simon
offer, but was reviewing Simon's proposal to buy all of the company, in
the latest twist in the battle for the No. 2 U.S. mall owner. Simon
teamed up with Blackstone Group LP to make a cash and stock offer for
all of General Growth and made the offer along with a separate bid to
bankroll its rival's exit from bankruptcy. Blackstone has committed more
than $1 billion to support a Simon deal for all of General Growth.
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Six Flags Emerges from Bankruptcy
Theme park operator Six Flags Inc. emerged from chapter 11 protection
yesterday after wiping out more than a billion dollars of debt by
turning the company's ownership over to bondholders, Reuters reported
yesterday. The company, which operates 19 amusement parks in North
America, enters its high season without the constraints of bankruptcy
and with less than half the debt it had when it filed for chapter 11
last June. The company exits bankruptcy as Six Flags Entertainment Corp
and under the control of hedge funds such as Stark Investments,
Pentwater Capital Management and Bay Harbour Management. The funds owned
its bonds and invested $725 million to recapitalize the company.
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Picower Estate to Pay Billions to Madoff
Investors
The estate of Jeffry Picower, an investor in Bernard Madoff's Ponzi
scheme who died last fall, is expected soon to pay at least $2 billion
to other Madoff investors burned by the fraud, the Wall Street
Journal reported today. The potential recovery from the settlement
would more than the double the $1.5 billion gathered so far by a trustee
representing investors. A lawyer for the trustee previously said in
court that he might be able to recover as much as $10 billion for
investors, or about half the amount they collectively lost from the
fraud. William Zabel, a lawyer for the Picower estate, previously said
that the estate would hand over at least $2 billion. That is
approximately the amount Picower and other entities associated with him
withdrew from Madoff's investment firm in the six years before it
collapsed, in December 2008, Zabel has said. The settlement would end a
lawsuit filed by the trustee last year that asked for $7.2 billion from
Picower, who died last October.
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