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November 2, 2009
Supreme Court to Hear Case
on Trustee Powers to Sell Assets Claimed as Exempt
The U.S. Supreme Court tomorrow will hear arguments
in
size='3'>Schwab v. Reilly (08-538), a case
from the Third Circuit on the power of a trustee to sell property for
the benefit of creditors.
href='http://www.scotusblog.com/wp/bankruptcy-exemptions-and-trustee-objections-schwab-v-reilly-argument-preview/#more-12064'>Click
here to read a summary of the case from the SCOTUS blog Web
site.
CIT Files for Chapter 11
Protection
CIT Group Inc. filed for chapter 11 protection
yesterday in a final attempt to restructure and keep the doors open at
the century-old commercial lender, the
face='Times






New
Roman'
size='3'>Wall Street Journal reported today.
The lender to nearly a million small and midsize businesses must now
maintain its customer base as it tries to rehabilitate under chapter
11protection. CIT garnered support from about 90 percent of voting
debt-holders for a pre-packaged reorganization plan that could allow the
lender to speed through chapter 11 and emerge with a new business model
by year's end. Under the plan, bondholders will exchange their debt for
new debt that matures later, as well as nearly all the equity in a
reorganized CIT. The bankruptcy stay would eliminate some $10 billion in
debt from the lender's balance sheet, the company said. CIT has been
weighed down by more than $30 billion in bond debt. A $2.3 billion
taxpayer bailout extended to CIT late last year under the Bush
administration will be wiped out in the bankruptcy.
href='http://online.wsj.com/article/SB125709781695721315.html'>Read
more. (Subscription required.)
Frank Says Overdraft
Protection Should Be “Opt-in”
Bank overdraft fees as high as $39 on debit card
transactions aren't 'favors' for consumers if they haven't asked for
them, House Financial Services Committee Chairman Barney Frank (D-Mass.)
said at a hearing on Friday, Bloomberg News reported. 'We wouldn't be in
a situation where we're considering legislation if you would have had an
opt-in regime from the beginning,' said Frank. Legislation under
consideration in the House would prohibit financial companies from
levying more than one overdraft fee per month or six per year, according
to Rep. Carolyn B. Maloney (D-N.Y.), who sponsored the bill. The bill
would make overdraft fees subject to the Truth in Lending Act, requiring
consumers' permission before enrolling them, and would prohibit
rearranging the order in which transactions are posted, which can
trigger an overdraft. It would also require fees to be in proportion to
the amount overdrawn, so a $5 cup of coffee will not have a $35 fee.
Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.)
introduced similar overdraft-fee legislation Oct. 19, saying that 'banks
should not be trying to bolster their profits at the expense of their
customers.'
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/10/30/AR2009103004194_pf.html'>Read
more.
In related news, the House Financial Services
Committee will hold a mark-up hearing on Tuesday to consider H.R. 3817,
the “Investor Protection Act of 2009,” H.R. 2609,
“Federal Insurance Office Act of 2009” and H.R. 3904, the
“Overdraft Protection Act.”
Court Approves Examiner in
Lyondell Chapter 11
At the request of unsecured creditors and U.S.
Trustee
size='3'>Diana Adams, Bankruptcy
Judge
size='3'>Ronald E. Gerber on Friday appointed
former ABI Resident Scholar Prof. Jack F.
Williams to probe certain concerns about
Lyondell Chemical Co.’s actions since it filed for chapter 11
protection earlier in 2009,
face='Times






New
Roman'
size='3'>Bankruptcy Law360 reported on
Friday.Lyondell's unsecured creditors’ committee first called for
the court to appoint an examiner on Oct. 2, saying a busted leverage
buyout orchestrated by Lyondell's prepetition secured lenders and
investor Leonard Blavatnik drove Lyondell into bankruptcy and deserved
closer scrutiny.The panel accuses Lyondell of allowing Blavatnik to
retain virtual control over the company, despite some management
changes, and of joining certain prepetition lenders in an attempt to
slow down litigation initiated against them by the unsecured creditors
in order to force Lyondell to choose between a speedy chapter 11 exit
and permitting the full litigation of the unsecured creditors'
claims. Read
more. (Subscription required.)
Hayes Lemmerz Reaches Deals
with Unions, PBGC
Bankrupt automotive wheel producer Hayes Lemmerz
International has reached settlements with two unions as well as the
Pension Benefit Guaranty Corp. allowing the company to terminate its
pension plan and reduce certain health benefits,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported on
Friday.Hayes Lemmerz filed motions on Thursday in the U.S. Bankruptcy
Court for the District of Delaware seeking approvals for deals with the
PBGC as well as with the United Auto Workers and United Steelworkers
unions, fulfilling requirements set by debtor-in-possession financing
providers.The PBGC agreed to assume the plan, including current
liabilities of about $70.2 million and projected contribution
obligations through 2014 of $83 million, in exchange for $2.8 million in
cash, an unsecured subordinated note of $14 million and 33.9 percent of
foreign creditor distributions designated in a reorganization plan,
according to a motion filed with the court.As of Jan. 1, 2008, the
pension plan had 4,786 participants, including 285 benefit recipients,
the motion said.
href='http://bankruptcy.law360.com/print_article/131619'>Read more.
(Subscription required.)
Philly Papers' Chapter 11
Sparks 1st Amendment Battle
Charter School Management Inc. is pressing its fight
against Philadelphia Newspapers LLC in a bankruptcy appeal, arguing that
an injunction blocking the paper from getting details about the company
via Pennsylvania’s Right to Know Law is enforceable,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported on
Friday.Charter School Management sued the newspaper chain in a
state-court defamation case in January 2006, saying that the newspapers
published falsehoods about Charter School Management and owners Vahan H.
and Danielle Gureghian.A bankruptcy stay is currently in effect while
the newspaper chain tries to reorganize, and the injunctive relief is
part of the stay.Meanwhile, the newspaper chain is seeking to press its
news investigation of the company's use of state tax dollars in its
operations.The dispute has also spawned two adversary proceedings before
the bankruptcy court.
href='http://bankruptcy.law360.com/articles/131443'>Read more.
(Subscription required.)
Analysis: U.S. Turns Screws
on Bailed-Out GMAC
In the 10 months since the consumer-finance company
received its first dose of rescue financing, GMAC has wrangled
repeatedly with the FDIC over its turnaround plans, the
face='Times New Roman'>Wall
Street Journal reported today. Currently the
company is locked in debate with the Federal Reserve about the adequacy
of its capital levels, with the Fed pushing GMAC to take billions more
in federal aid from the Treasury Department. GMAC's complicated
relationship with the federal government stems from the government's
conflicting priorities as it attempts to get the economy back on track.
On the one hand, it needs the private sector to provide consumers with
abundant credit, but it can ill afford to have financial firms engage in
the kind of risky lending that precipitated the crisis.
href='http://online.wsj.com/article/SB125712736353621959.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
U.S. Trustee Balks at GPX
Executive Bonuses
U.S. Trustee
face='Times






New
Roman'
size='3'>Phoebe Morse opposed bankrupt GPX
International Tire Corp.’s bid to authorize a senior management
incentive program that would provide stay bonuses to three officers,
claiming that the program is a “disguised key employee retention
agreement,”
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. As part of the incentive program, each
officer would earn higher percentages of their stay bonuses on
consummation of segment sales, receiving 50 percent for a single
business unit, 75 percent for two units and 100 percent for all three.
However, Morse contends that the officers stand to collect their bonuses
even if none of the segments is sold. GPX filed for chapter 11
protection on Oct. 26 with a plan to break apart and sell its business
as three separate business segments.
href='http://bankruptcy.law360.com/print_article/131466'>Read
more. (Subscription required.)
Analysis: Small Banks Move
In as Giants Falter
Across the country, community banks are trying to tap
into the public’s outrage over Wall Street greed to lure customers
from their big multinational competitors, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. While 115 small banks have failed since the
financial turmoil began last year, and more are expected as loans for
commercial real estate begin to falter, they represent only a small
fraction of the nation’s 8,000 or so community banks. Even credit
unions and small private banks, which have competed fiercely against one
another for years, are banding together to combat the megabanks. The
recession has provided an opening for small banks to promote their
relative stability. According to the Federal Deposit Insurance Corp.,
the federal agency that insures deposits, banks with less than $1
billion in assets remained the best capitalized in the industry, meaning
they have adequate cash to absorb loan defaults.
href='http://www.nytimes.com/2009/11/02/business/media/02adco.html?_r=1&ref=business&pagewanted=print'>Read
more.
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