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July 1, 2009
size='3'>Analysis: Insured, but Still Bankrupted
by Health Crises
Health insurance is
supposed to offer medical and financial protection, but an estimated
three-quarters of people who are pushed into personal bankruptcy by
medical problems actually had insurance when they got sick or were
injured, the New York
Times reported today. Even as the
government tries to cover the tens of millions of Americans without
medical insurance, many health policy experts say simply giving everyone
an insurance card will not be enough to fix what is wrong with the
system. Too many other people already have coverage so meager that a
medical crisis will mean a financial calamity. “Underinsurance is
the great hidden risk of the American health care system,” said
Prof. Elizabeth
Warren of Harvard Law. “People do
not realize they are one diagnosis away from financial
collapse.”
href='http://www.nytimes.com/2009/07/01/business/01meddebt.html?hp=&pagewanted=print'>Read
more.
href='http://pnhp.org/new_bankruptcy_study/Bankruptcy-2009.pdf'>Click
here to read a recent study published in the
face='Times New Roman'>American
Journal of Medicine claiming that 62.1 percent
of all bankruptcies filed in 2007 were due to medical problems,
including high medical bills or loss of income because of
illness.
More Small Businesses Going
Bankrupt
With commercial bankruptcies surging, fewer people are
starting small businesses, and firms already open are struggling under
changing consumer habits, a lack of funding options and tougher
bankruptcy laws,
face='Times New Roman' size='3'>USA Today
size='3'>reported today. The first five months of this year have shown a
52 percent increase in the total number of commercial bankruptcy filings
(36,106) compared with the same period last year (23,829), according to
the Automated Access to Court Electronic Records. The vast majority of
commercial bankruptcies, which are not separated by size of firm by data
keepers, are filed by entrepreneurs and small-business owners, says
Prof. Robert Lawless of the
University of Illinois College of Law. 'In the past, small-business
formation increased in a recession because people had self-employment
thrust upon them,' he says. 'One avenue out of economic hard times
— self-employment — has become less attractive, because the
bankruptcy law is less forgiving' and there are fewer options for those
entrepreneurs to get bank loans or to find funding elsewhere.
href='http://www.usatoday.com/money/smallbusiness/2009-06-30-small-businesses-bankruptcy_N.htm'>Read
more.
Grede Foundries Files for
Bankruptcy Protection
Grede Foundries Inc. filed for chapter 11 protection
yesterday and said that it has an offer for financing until the company
could be sold, the
face='Times New Roman' size='3'>Milwaukee Journal-Sentinel
reported today. Grede's assets total nearly $144 million
and its debts are more than $148 million, the company says in documents
filed Tuesday in U.S. Bankruptcy Court in Madison, Wisc. The two largest
creditors are the Grede Employee Retirement Plan, which is owed $33.7
million, and the Grede Group Health plan, which is owed $24.7 million.
All told, Grede has 2,400 potential creditors. The company said that
Wayzata Investment Partners LLC has offered a $45 million temporary loan
to allow it time for an orderly, court-supervised sale. The company
employs 1,635 people and operates eight foundries in Wisconsin,
Michigan, Minnesota, Indiana, Kansas and South Carolina.
href='http://www.jsonline.com/business/49534957.html'>Read
more.
Autos
General Motors' Sale
Hearing Set to Continue
A hearing to determine General Motors' fate will
continue today, with the automaker expected to face more objections to
its plan to sell the bulk of its assets to a new company and quickly
emerge from bankruptcy protection, the Associated Press reported today.
Attorneys, bondholders, consumer groups and others packed a Manhattan
courthouse yesterday to hear about five hours of testimony by GM CEO
Fritz Henderson, who said the No. 1 U.S. automaker's sale is necessary
to get GM back on its feet quickly. Henderson cautioned that the
government could walk away from the deal if the sale doesn't close by
July 10. GM, whose June 1 filing for bankruptcy protection was the
fourth-largest in U.S. history, is hoping to avoid a lengthy sale
hearing that could postpone its emergence from chapter 11. Last month,
objections from a group of bondholders and others dragged out rival
Chrysler LLC's sale hearing for three days.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/30/AR2009063003908_pf.html'>Read
more.
Analysis: As GM
Reorganizes, Pension Fund Weakens
Even as its pension fund faces a spike in payouts as
more workers enter retirement, General Motors is not putting any new
money in the fund as the company is not required to make any
contributions to the fund until 2013, the
face='Times
New
Roman' size='3'>New York Times reported today.
The longer this goes on, the weaker the fund will be and the more
uncertain its long-term viability. For now, the pension payments to its
younger “retirees,” part of a deal GM negotiated with the
United Automobile Workers union in 2007, allow the company to
drastically shrink its work force without having to come up with the
cash to pay severance. The payments also relieve some of the burden on
social service programs in the countless factory towns and counties
around the country with large numbers of GM’s newly jobless.
“GM basically raided the pension plan, by having a lot of these
severance benefits paid through it,” said Douglas J. Elliott, a
fellow with the Brookings Institution who specializes in financial
institutions and policy.
href='http://www.nytimes.com/2009/07/01/business/01pension.html?_r=1&hp=&pagewanted=print'>Read
more.
Detroit Public Schools
Examine Chapter 9 Filing and Other Financial Options
Detroit Public School officials said yesterday that a
chapter 9 filing is just one of many options being considered to address
its multi-year deficit, but questions remain on how much such a filing
would cost and whether the district would reap adequate benefits,
the
size='3'>Detroit News reported today.
Meanwhile, Michigan Department of Education officials said that a
chapter 9 filing, which is available for municipalities, would be
unprecedented in Michigan. Robert Bobb, the district's emergency
financial manager, floated the possibility during a budget presentation
Monday in which he said the district is facing a $259.5 million deficit.
Bobb called bankruptcy a 'last resort,' but said the district met with
attorneys last week to explore the ramifications.
href='http://www.detnews.com/article/20090701/SCHOOLS/907010351/1410/METRO01/Bankruptcy-not-only-option-for-DPS'>Read
more.
Trustee Gets Brooke Chapter
11 Converted to Chapter 7
The court overseeing insurance agency Brooke Corp.'s
bankruptcy has granted a trustee's motion to convert the company's
chapter 11 proceedings to chapter 7, noting that nearly all the debtors'
employees have been terminated and that there is no prospect of
reorganization,
size='3'>Bankruptcy Law360 reported yesterday.
Bankruptcy Judge
face='Times
New
Roman' size='3'>Dale L. Somers signed off on
an order on Monday granting an April 30 motion to convert the jointly
administered chapter 11 proceedings of debtors Brooke Corp., Brooke
Capital Corp. and Brooke Investments Inc. to chapter 7. The April 30
motion came from chapter 11 trustee Albert Riederer, who will now serve
as chapter 7 trustee of the debtors' estates. Riederer argued —
and Judge Somers agreed — that there was nothing left to do with
respect to the debtors that could not be accomplished in a more
streamlined chapter 7 proceeding.
href='http://bankruptcy.law360.com/articles/108864'>Read
more. (Subscription required.)
FDIC Proposing New Rules on
Private-Equity Investors Acquiring Failed Lenders
The Federal Deposit Insurance Corp. is expected
tomorrow to propose new guidelines for private-equity investors seeking
to buy failed banks, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Seventy banks have failed since January 2008,
and federal bank regulators are eyeing private-equity firms as a
potential source of capital for both operating and failed institutions.
The proposal is expected to deter private-equity investors from buying
and flipping failed banks and could include a mandatory investment
period. The proposal is also expected to require private-equity
investors to hold higher capital reserves than traditional banks would
be required to hold.
href='http://online.wsj.com/article/SB124639956473275935.html#mod=testMod'>Read
more. (Subscription required.)
Bankrupt KB Toys Seeks
Permission to Sell Off Intellectual Property
KB Toys Inc., which concluded its
going-out-of-business sale in February, is seeking court approval to
sell off its intellectual property,
face='Times
New
Roman' size='3'>Bankruptcy Law360 reported
yesterday. The company, which requested entry of a sale procedures order
and entry of a sale order, said it had not yet entered into a
stalking-horse agreement for the property. The motion said that the bid
deadline would be Aug. 4, and that an auction would take place two days
later. The case is
face='Times New



Roman'
size='3'>In re KB Toys Inc., case number
08-13269, in the U.S. Bankruptcy Court for the District of
Delaware.
href='http://bankruptcy.law360.com/articles/108995'>Read
more. (Subscription required.)
Chapter 7 after Judge's Approval
Monaco Coach Corp. has won approval to convert its
chapter 11 bankruptcy into a chapter 7 liquidation, a development that
comes just weeks after the recreational vehicle maker sold off its core
assets and luxury line,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Bankruptcy Judge
face='Times New Roman'>Kevin J.
Carey on Monday signed off on Monaco's
proposal Monday, with the official conversion date set for yesterday.
Any pending adversary proceedings and other contested matters will
continue to be heard before Judge Carey pending the appointment of a
liquidation trustee, the judge's order said. Monaco changed its name to
MCC upon the completion of the sale.
href='http://bankruptcy.law360.com/print_article/108896'>Read
more. (Subscription required.)
Michael Vick’s
Bankruptcy Plan Offers More to Creditors
Michael Vick's revised bankruptcy plan would funnel
more of his future pay to his creditors and ensure that they receive a
portion of his earnings even if the suspended NFL star doesn't return to
the league, the Associated Press reported yesterday. Bankruptcy
Judge
size='3'>Frank J. Santoro rejected Vick's
first chapter 11 plan in April, saying that it was not feasible. Among
his concerns was that the plan depended heavily on Vick returning to the
NFL and that Vick was trying to hang on to too many assets. His first
bankruptcy plan would have allowed him to keep the first $750,000 of his
annual salary, and Vick also intended to keep two houses and several
cars. Under the new plan, 10 percent of the first $750,000 Vick earns
would go to creditors, and he's agreed to liquidate a house under
construction in Virginia. If Vick doesn't return to the NFL, the new
plan would give creditors a portion of whatever he earns from a lower
paying job.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/30/AR2009063000789_pf.html'>Read
more.
NHL Supports Reinsdorf's
Bid for Bankrupt Coyotes Franchise
The NHL supports $148 million bid by Jerry Reinsdorf,
the owner of baseball's Chicago White Sox and the NBA's Chicago Bulls,
to buy the Phoenix Coyotes out of chapter 11 bankruptcy and keep the
team in Glendale, Ariz., the Associated Press reported yesterday.
Reinsdorf's offer, submitted to a Phoenix bankruptcy judge last week,
calls for a new Jobing.com Arena lease with the city of Glendale and
unspecified new agreements with other creditors, including the NHL,
which has been funding the club. The offer is $64.5 million less than
the bid by Canadian billionaire Jim Balsillie, who wants to move the
franchise to Southern Ontario. The NHL has opposed Balsillie's bid,
saying that it wants to keep hockey in the desert despite tepid fan
support in recent seasons.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/30/AR2009063004382_pf.html'>Read
more.
International
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