February 3, 2000
Senate Passes S. 625, Bill Heads to Conference with House
Yesterday afternoon the Senate approved the Bankruptcy Reform
Act of 2000 (S. 625) by a vote of 83-14, clearing the way for the start
of a conference committee with the House on the differences with H.R.
833. More than 30 Democrats joined nearly all Republicans present to
pass the bill by a veto-proof margin. [Three members (Sen. Hutchison
(R-Texas), Sen. Graham (D-Fla.) and Sen. Brownback (R-Kan.)) voted
against the bill due to the homestead cap. All are from unlimited
homestead exemption states. Sen. Peter Fitzgerald (R-Ill.) voted
'present' on the bill].
The final vote occurred after a bit of drama on the amendment by Sen.
Charles Schumer (D-N.Y.) to make non-dischargeable claims arising from
judgments, consent decrees or settlement agreements involving or
alleging denial of access to abortion clinics. In anticipation of a
close vote on the amendment, Vice President Al Gore interrupted his
presidential campaign to make a rare appearance in his role as president
of the Senate, where he could have cast a potentially tie-breaking vote.
Many Republican opponents of the amendment then voted in favor of the
amendment, thus denying the Vice President the chance to break a tie.
The Schumer amendment passed 80-17. The same amendment was defeated in
the Senate Judiciary Committee by a 9-9 vote. There is no similar
provision in the House bill, and it is not clear whether such an
amendment would survive a conference.
Before final passage, the Senate also approved a modified version of
the Schumer/Durbin 'safe harbor' amendment (#
href='/legis/bills/99-2762amend.html'>2762),
limiting the ability to bring §707(b) motions against certain
low-income debtors. The new language was worked out with the bill's
Republican managers without need for a vote and will be online at ABI
World today.
The Senate defeated an amendment (#
href='/legis/bills/99-2779amend.html'>2779) by Sen. Russ
Feingold (D-Wis.) to relax the tenant eviction provisions now contained
in §311 of the bill, so that those tenants who pay rent post-filing
would not be subject to eviction under the terms of the bill. The
amendment was tabled by a vote of 54-43, with one member voting
'present.'
The Senate also easily defeated an amendment (#
href='/legis/bills/99-2658amend.html'>2658) by Sen.
Carl Levin (D-Mich.) to make non-dischargeable the claims arising from
firearm-related debts. The vote was expected to be close, but the
amendment failed 29-68, with one member voting 'present.'
Senate-House Conference
Sen. Charles Grassley (R-Iowa) the bill's sponsor,
predicted a 'spirited' conference with the House, but suggested that
this conference would be an easier one than in the 105th Congress, as S.
625 and H.R. 833 contain many similarities. Sen. Patrick Leahy (D-Vt.)
warned that it is important that the new conference avoid a repeat of
the last conference.
While there are a number of different bankruptcy provisions to
reconcile in conference, (such as the homestead exemption and the lender
disclosure provisions, among others) the outcome of the conference may
hang on how conferees deal with collateral issues such as the abortion
clinic language and the minimum wage increase provision. This latter
provision, adopted last fall, is opposed by the Clinton
administration.
CQ Daily Monitor reported today that House and Senate
Republican aides are discussing how to handle the Senate provisions that
would raise the minimum wage $1 per hour over three years and provide an
$18.4 billion tax break over five years for small businesses and the
self-employed. House Ways and Means Committee Chair Bill Archer
(R-Texas) has warned that he would 'blue slip' (or reject consideration)
of the bill, according to Senate Minority Leader Tom Daschle (D-S.D.)
because of provisions granting new tax breaks. Democrats and the White
House are opposed to the tax breaks, calling them unnecessary, and they
believe the increase in wages is spread out over too long a period.
Republican aides have said the tax and wage provisions could be stripped
before the bill goes to conference with the House on its bill, H.R. 833.
Daschle said that Democrats would support this move.
Reaction to the Senate's Vote
The White House reportedly opposes some provisions in both
H.R. 833 and S. 625 as too hard on debtors, but the American Bankers
Association (ABA) yesterday said, 'This is going to repair the system by
requiring wealthy debtors to repay what they can afford, while
preserving the bankruptcy safety net for others.' The National Retail
Federation (NRF) applauded the Senate's passage of the bill, and NRF
President Tracy Mullin said, 'The Senate's action sends a clear signal
that personal responsibility and fairness belong in the bankruptcy
process.' The NRF is a retail trade association with membership that
comprises all retail formats and channels. Meanwhile, former Sen. Howard
Metzenbaum, chairman of the Consumer Federation of America, criticized
the bill as a 'victory for the credit card industry but a disaster for
consumers. It [the bill] will deny many families in financial crisis a
fresh start while spurring more reckless and irresponsible lending by
credit card issuers.'
Fed Raises Interest Rate by Quarter of a Percentage Point
Yesterday the Federal Reserve's Federal Open Market Committee,
the bank's policymaking group, raised short-term interest rates by a
quarter of a percentage point and warned that further increases may be
ahead, The Washington Post reported. Fed officials are
concerned that the economy's robust growth will eventually spur
inflation, so they want to discourage enough borrowing to slow the
economy's growth. The federal fund rate was increased to 5.75 percent,
following three similar increases last summer and fall. The Federal
Reserve also increased the discount rate, the interest rate financial
institutions pay when they borrow directly from the Fed, to 5.25 percent
from 5 percent. Consumers and businesses will feel the impact as
financial institutions raise their prime lending rate to 8.25 percent
from 8 percent.
Integrated Health Services Files Chapter 11
Integrated Health Services Inc. (IHS), Sparks, Md., announced
yesterday that it and many of its operating subsidiaries filed voluntary
chapter 11 petitions in the District of Delaware in order to facilitate
efforts to restructure its capital and lease obligations, according to a
newswire report. The company, a highly diversified health services
provider, has obtained a commitment for up to $300 million in
debtor-in-possession (DIP) financing with Citibank N.A., and IHS has
sought court approval to access the DIP financing to fund normal
operations. IHS is the seventh national provider to file for bankruptcy
protection in the last six months; others that have filed include Vencor
Inc., Sun Healthcare Group Inc., Mariner Post-Acute Network Inc., Lenox
Health Care Inc., Frontier Group Inc. and Newcare Health Corp.
Integrated Health CEO Robert N. Elkins said, 'The dramatic impact of the
implementation of the 1997 Balanced Budget Act on our revenues and cash
flow severely impacted the company's ability to service our current
capital structure.' IHS operates about 1,600 post-acute care facilities,
including about 400 nursing homes nationwide. The Washington
Post reported today that IHS had $37.3 million in loans outstanding
to Elkins as of March 31. As part of his compensation package, IHS also
put $18.8 million in trust for Elkins as of Dec. 31, 1998. The company
also had agreed to pay a minimum of $1.1 million a year to lease a plan
for Elkins from a company that he owned. The company has not commented
on those matters.
Some analysts and government officials have said that nursing homes
businesses put themselves in difficult financial positions, The
Washington Post also reported. Standard and Poor's Director of
Corporate Health Care Ratings Michael Kaplan said, 'Those companies that
were more disciplined in their acquisition strategy and limited the
amount of debt they assumed are still operating.' Sen. Charles E.
Grassley (R-Iowa) said that mismanagement has played a role with nursing
home executives counting on easy money from Medicare. 'I suppose they
had a kind of blank check from the federal government....but we just
can't guarantee anyone a blank check,' he said. Grassley is chair of the
Senate's Special Committee on Aging.
The General Accounting office studied two of the nursing home giants
and concluded in December that the Medicare payments are probably
adequate overall but 'may be too low for certain types of patients and
too high for others.'
Bankruptcy Creditors' Service Inc. announced the publication of
'Integrated Health Bankruptcy News,' a newsletter that will track the
chapter 11 case. The first issue includes background information on the
operations and finances, detailed information from the petitions, a
consolidated list of the largest unsecured creditors and a calendar of
key dates. The first issue is available free of charge at
href='http://www.bankrupt.com/ihs.txt'>http://www.bankrupt.com/ihs.txt
and the newsletter is available via e-mail on a subscription basis.
Department of Agriculture May Offer Relief to Growers
Affected by ABT Bankruptcy
AgriBio Tech Inc. (ABT), Olympia, Wash., filed for chapter 11
protection on Jan. 24, and the state Department of Agriculture may be
able to help some seed producers doing business with ABT to recoup their
losses, according to a newswire report. The department holds a $220,000
surety bond on ABT that may provide partial payment to those that
qualify. According to state law, producers who sell, ship or deliver
agricultural products for processing, sale or resale may be eligible.
The state's law gives the Department of Agriculture authority to make a
claim against the surety bond on behalf of qualified producers.
wp='BR2'>
Tops Appliance City Files Chapter 11
Tops Appliance City, Edison, N.J., has filed for chapter 11
protection in the District of New Jersey, according to a newswire
report. The company, which retails home appliances, air conditioners,
housewares and kitchen cabinetry, said that the filing was precipitated
by increased operating expenses associated with its three stores in
Manhattan and Brooklyn, N.Y., and lower-than-expected sales in the
fourth quarter of 1999 while the company was implementing its strategy
to phase-out the sale of consumer electronics. Over the weekend, the
company closed its stores in Manhattan and Brooklyn to streamline
operations and focus on its five most profitable stores in Edison,
Lakewood, Union and Jersey City, N.J., and Hawthorne, N.Y.
Creditors File Involuntary Petition Against Mactell
Mactell Corp., Austin, Texas, announced that three of its
former creditors have filed an involuntary chapter 7 petition against
the company, according to a newswire report. The company, a former
manufacturer of performance enhancement computer products, had
previously attempted to work its way out of the financial problem
created when Apple Computer Inc. decided to discontinue the licensing of
the Macintosh operating system to clone manufacturers in August 1997.
Mactell incurred a loss of about $2.8 million during the year ended June
30, 1998 and an additional loss of about $1.8 million for the year ended
June 30, 1999. In October last year, the board of directors voted to
close the company operations. Former officers of the company have
attempted to recapitalize the company subsequent to closing its
operations, after receiving several inquiries from potential investors.
No formal agreements or terms have been agreed upon to date, and the
company its doubtful that it will be recapitalized.
Imperial Home Decor Receives Approval for $75 Million in DIP
Financing
The Imperial Home Decor Group Inc., Cleveland, said yesterday
that it has received final approval from the bankruptcy court to use its
debtor-in-possession (DIP) financing facility, which provides for up to
$75 million, according to a newswire report. The financing is a two-year
working capital facility from the Chase Manhattan Bank. It includes a $7
million facility for use by the company's U.K. operations. The company
filed chapter 11 early last month in the District of Delaware.
Service Merchandise Receives Extension on Exclusivity
Period
Service Merchandise Co. Inc., Nashville, announced it has
received court approval to extend the period in which the company has
the exclusive right to file a reorganization plan to April 30, 2001 and
further extend the exclusive right to solicit acceptance of the plan to
June 30, 2001, according to a newswire report. Service Merchandise filed
chapter 11 in March last year.
Judge Approves Final Orange County Bankruptcy Report
U.S. Bankruptcy Judge John Ryan yesterday approved
Orange County, Calif.'s final bankruptcy report, clearing the way for
distribution of $871 million in settlements recovered from Wall Street
investment firms, according to the Associated Press. The ruling brings
to an end the $1.64 billion ordeal for most of the schools, cities and
special districts involved in the largest chapter 9 filing ever. The
county filed chapter 9 in December 1994 and emerged from bankruptcy in
June 1996.
Garden Botanika Submits Business Plan to Creditors'
Committee
Garden Botanika Inc., Redmond, Wash., has submitted its
business plan for the upcoming fiscal year to its creditors' committee;
this was a condition set by the committee for Garden Botanika's
continued operations under chapter 11, according to a newswire report.
The cosmetics and personal care products company said the plan is based
on the operation of a streamlined store base of 109 of the company's
best-performing locations and the closing of 38 unproductive stores. The
plan also calls for an increased emphasis on the company's web site
href='http://www.gardenbotanika.com/'>(http://www.gardenbotanika.com)
and on sales through other distribution channels, such as licensing and
wholesale opportunities.
Just For Feet Creditors Ask Court to Convert Case to Chapter
7
The official committee of unsecured creditors of Just For Feet Inc.
(FEETQ) is asking the bankruptcy court to convert the athletic footwear
retailer's chapter 11 case to a chapter 7 liquidation. In a motion filed
on Jan. 31 in the U.S. Bankruptcy Court in Wilmington, Del., the panel
argues that there is no alternative available to the court but to
convert the case to chapter 7. The committee contends that Just For Feet
hasn't proposed a liquidating plan of reorganization because such a plan
can't be confirmed by the court absent the agreement of all classes of
creditors. And, neither the committee nor the unsecured creditors it
represents would consent to a plan that provides no distribution to
unsecured creditors.
Courtesy of
href='http://www.fedfil.com/bankruptcy/developments.htm'>The
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February 3, 2000
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