February 23, 2000
Financial Industry Likely to Proceed Slowly on
Gramm-Leach-Bliley Act
The Gramm-Leach-Bliley Act, signed into law by President
Clinton in November, left many in financial and legal circles predicting
the vast consolidation and restructuring of the financial services
industry, yet it is more likely that any fundamental changes the law may
cause will not happen immediately, according to the New York Law
Journal. The Act, which goes into effect on March 11, will bring
about the creation of financial holding companies (FHCs) that will
provide services ranging from insurance and securities underwriting to
insurance sales and loans. Banks will be able to expand these services
and offer others, provided that the banking operations of the company
are well-managed and meet lending requirements. The new law will also
allow foreign banks with U.S. operations to be treated as financial
holding companies. However, financial institution attorneys say that
restructuring or merging complex financial institutions is no simple
task, and it can be quite expensive.
According to attorneys, one impediment to the development of FHCs is
the fact that there is insufficient information about what financial
activities an FHC will be allowed to perform, and the major U.S. banks,
which already meet capital, management and lending requirements, may be
hesitant to be the first to apply to become an FHC. The Act states that
investments, lending, insurance, securities transactions and control or
ownership of banking investments are financial in nature, yet it is
unclear what other activities would be classified as such by the Federal
Reserve or Treasury Secretary. 'Until actual applications have been
approved or rejected, it will remain an uncertain but fertile ground for
opportunity,' said Jerome Walker, a partner with Salans Hertzfeld
Heilbronn Christy & Viener's global financial institutions group,
stating that the financial institutions that file first will set the
standard for others to follow. 'The easy part is filing the documents,'
he said. 'The hard part is figuring out how to move people around or
deal with your product line.'
Despite the new challenges in taking advantage of the new law,
attorneys say the law is definitely needed. 'The convergence of these
industries is going to be an evolution, not a revolution,' said Bonnie
Steingart, a partner with Fried, Frank, Harris, Shriver & Jacobson
who represents banks and insurance companies. 'These are big companies
with complex businesses.'
As ABA Debates MDPs, Accounting Firms Press Ahead into Legal
Profession
While the American Bar Association (ABA) continues its debate
over multidisciplinary practices (MDPs), Big Five accounting firms and
others are moving ahead in the legal profession, according to Legal
Times. While some attorneys see MDPs as an opportunity, others see
them as a threat to the profession. Accounting firms and financial
concerns are forming global law networks, acquiring intellectual
property practices, establishing joint ventures with law firms and
financing brand name law firms such as Washington's McKee Nelson Ernst
& Young. State bars are set to meeting May to discuss their findings
of their own MDP Commission and to review the ABA MDP's Commission
scheduled April report. State bars do not like the concept generally,
but these ongoing discussions may simply delay the inevitable. At the
ABA meeting earlier this month, ABA MDP Commission member Paul Friedman,
a D.C. District Court judge, questioned the bars' refusal to acknowledge
that MDPs already exist. For instance, last October Boston's Bingham
Dana spun off the financial services department of its trusts and
estates section to form a joint venture with Baltimore-based investment
firm Legg Mason. No attorneys work at the new Bingham Legg Advisers,
which helps wealthy individuals manage their money, but it is a boon to
the law firm. As 50 percent owners of the venture, Bingham Dana partners
add half the venture's profits to their pot as well as picking up
additional law clients.
McDermott International Announces Subsidiary's Chapter 11
Filing
McDermott International Inc., announced yesterday that its
wholly owned subsidiary, The Babcock & Wilcox Co. (B&W), and
certain of its subsidiaries, filed a voluntary chapter 11 petition in
the Eastern District of Louisiana, according to a newswire report. The
company is taking this step because it offers a viable legal process by
which it can seek to determine and comprehensively resolve asbestos
liability claims. B&W has secured a commitment of up to $300 million
in debtor-in-possession financing provided by Citibank N.A. and Salomon
Smith Barney. B&W has requested court approval for the financing on
an expedited basis. McDermott International and certain of its other
subsidiaries have obtained an additional $500 million in financing, from
the same lenders, to ensure uninterrupted operations. B&W President
James F. Wood said, 'Our business remains solvent and strong. However,
the increased demands for settlement of asbestos claims represent a real
threat to B&W's long-term health unless we take this step now.'
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AgriBio Tech Names Bill Brandt 'Responsible Person'
AgriBio Tech (ABT) announced that on Feb. 15 the bankruptcy
court approved the appointment of William A. Brandt
Jr., a principal of Development Specialists Inc., as the
company's responsible person under Federal Rule of Bankruptcy Procedure
9001(5), according to a newswire report. As the responsible person,
Brandt will be in control of the daily operations, and although he will
not be an officer of the company, he will have all of the powers vested
in the members of the board of directors and officers of ABT. The court
also approved ABT's retention of DSI as reorganization consultants to
assist Brandt. Following Brandt's appointment, all directors and
officers resigned. Brandt, with ABT and DSI, has determined that it is
in the best interests of the company's estate to sell the assets in one
or more going-concern sales as efficiently and as expeditiously as
possible, provided that sufficient funding for an orderly sale process
exists. The company is preparing a bid solicitation package, which will
be disseminated to all parties expressing interest in purchasing any of
the company's assets. ABT, a seed company specializing in the forage and
turfgrass sector, reported a net loss of $19.5 million for the second
quarter ended Dec. 31. The company recently filed for chapter 11
protection.
Service Merchandise Cuts Additional Jobs
Nashville, Tenn.-based Service Merchandise Co. Inc. announced
it will cut an additional 4,800 jobs, reduce stores sizes and
discontinue some product lines as it continues its reorganization under
chapter 11 protection, the Associated Press reported. Creditors forced
the discount retailer into bankruptcy last March when they claimed debts
of $1.29 billion. To date, the company has cut 5,000 jobs and closed 122
stores.
Jitney Jungle Closes Stores
Jitney Jungle Stores of America Inc., Jackson, Miss., announced
this week that it closed five stores on Feb. 19: three in Mississippi
and two in Louisiana, according to a newswire report. The closings are
part of the previously announced plan to close low-volume,
underperforming stores as part of its ongoing effort to emerge from
bankruptcy. Currently the company operates 172 grocery stores, 54 gas
stations and 10 liquor stores throughout Mississippi, Alabama,
Louisiana, Tennessee, Florida and Arkansas.
Loewen Group Announces Cut in Losses for Fourth Quarter
Loewen Group Inc., Vancouver, announced this week that it cut
its net and operating losses in the 1999 fourth quarter, according to
Reuters. The No. 2 funeral home and cemetery operator in North America
filed for bankruptcy protection in Canada and the United States last
year. Loewen reported that operating losses were $2.9 million, down from
$46.4 million in the same 1998 quarter. In January, the court approved
the sale of 371 non-core funeral and cemetery operations, and the
company is moving ahead with those sales. It has received more than
1,600 inquiries on the process, sent information packages out to more
than 600 potential bidders and received more than 250 letters of intent
for assorted groups of properties.
Kentucky and Tennessee Trustee Reappointed
Attorney General Janet Reno reappointed Ellen B.
Vergos as U.S. Trustee for Region 8, which consists of Kentucky
and Tennessee, according to the Executive Office for U.S. Trustees.
Vergos, who was first appointed trustee for the region in January 1995,
has practiced bankruptcy law since 1981. She received her bachelor's
degree from Vanderbilt University and her J.D. from the University of
Memphis School of Law.
Japan to Establish Bank for Failed Insurers
Japan's Ministry of Finance announced that it will amend
regulations for life insurers by setting up a bridge-bank type of
institution to smooth the industry's bankruptcy procedures, Reuters
reported. The new regulations would allow the Life Insurance
Policyholders Protection Corp. to set up an institution to buy assets
from bankrupt insurers and managed them until the newly created
organization finds a buyer.
AgriBioTech Seeking to Sell All of Its Assets
AgriBioTech Inc. (ABTXQ) is looking to sell substantially all of its
assets as a whole or in parts soon, according to the seed company's
turnaround consultant. Bill Brandt of Development Specialists
Inc. told the Daily Bankruptcy Review that he intends to ask the U.S.
Bankruptcy Court in Las Vegas within the next week for authorization to
solicit bids and respond to more than 70 expressions of interest he's
seen for AgriBioTech's assets. Brandt says he plans to conduct prompt
sales and hopes to have the deal or deals finalized by Memorial Day. He
anticipated a late-March bid return date following an accelerated due
diligence process.
Courtesy of
href='http://www.fedfil.com/bankruptcy/developments.htm'>The
Daily Bankruptcy Review Copyright ©
February 23,
2000.
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