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A federal judge yesterday ordered ongoing mediation in Detroit's historic bankruptcy over a potential settlement between the city and one of its fiercest creditors, and added holdout creditor Financial Guaranty Insurance Co. to the list of parties whose attendance is required, Reuters reported yesterday. U.S. District Judge Gerald Rosen, the chief mediator in the city’s bankruptcy case, ordered that mediation, which began yesterday, will also take place today and will continue "day-to-day thereafter as deemed necessary, until released by the mediators." The city and Syncora Guarantee Inc, the bond insurer that had been the fiercest holdout creditor in the case, notified the bankruptcy court on Tuesday that they had reached a settlement in principle. Sealing that deal would leave FGIC, another bond insurer, as the only major holdout creditor left in the Detroit bankruptcy. Both Syncora and FGIC faced recoveries of 10 cents on the dollar or less in the bankruptcy as other creditors including the city's pension funds reached deals. U.S. Bankruptcy Judge Steven Rhodes on Wednesday put Detroit's case on hold until Monday in the wake of the potential deal.

A court fight over more than $7 billion raised for bondholders and other creditors of Nortel Networks Corp. will be delayed unless a judge finds that European units of the defunct telephone maker filed a “frivolous” appeal, company lawyers said yesterday, according to Bloomberg News. The European units want to ask a federal appeals court in Philadelphia to force all sides into private, binding arbitration. The units, known as the EMEA debtors, plan to appeal a decision by U.S. Bankruptcy Judge Kevin Gross in Wilmington, Del., rejecting arbitration and scheduling next year’s court fight over how best to divide the cash. Once filed, the appeal may prevent parties from preparing for the court fight until the appellate panel rules, causing a delay, according to James L. Bromley, Nortel’s lead U.S. bankruptcy attorney. Nortel’s U.S. unit and its U.S. bondholders and creditors want Judge Gross to declare the appeal frivolous, a finding that would allow preparations for next year’s court fight to start. Based in Mississauga, Ontario, Nortel filed for bankruptcy in Canada, the U.S., the U.K. and France, with various units under the control of separate teams of lawyers and under the jurisdiction of different courts. The case is Nortel Networks Inc., 09-bk-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Christy Romero, the Special Inspector General for the Troubled Asset Relief Program (TARP), said that the Treasury Department should stop using the Libor overnight interest rate in its loan programs given that it is “potentially subject to manipulation” and undermines confidence in the markets, MarketWatch.com reported today. The rate is at the center of a massive industry-wide, international investigation into the setting of interbank-lending rates after Barclays PLC was fined roughly $450 million in June for fixing the London rate for interbank lending (Libor). According to TARP’s inspector general, taxpayers are owed over $6 billion in long-term loans indexed to the rate. Instead of indexing to Libor, the report recommends that TARP contracts should be amended to use alternative rates permitted by the program, according to Romero.

ABI's Commission to Study the Reform of Chapter 11, whose 22 members constitute a venerable bankruptcy industry Hall of Fame, held a hearing yesterday to gather feedback on what is right and wrong with the statutory scheme that has governed chapter 11 bankruptcy since 1978, Reuters reported. The commission's charge includes "literally considering starting from scratch and re-inventing the statute," said Robert Keach, attorney and commission co-chairman. The commission plans to eventually submit a report to Congress, targeted for April, 2014, that could serve as "part blueprint, part outline" for new legislation, Keach said. The commission will study 13 areas of bankruptcy law, including labor & benefits issues, financing rules and government supervision. It is collecting feedback from several groups through a series of hearings, with upcoming dates at the National Conference of Bankruptcy Judges in San Diego on Oct. 26, and a convention of trade group the Turnaround Management Association in Boston on Nov. 3. Read more:
http://www.reuters.com/article/2012/10/18/bankruptcy-reform-idUSL1E8LHP…

To obtain the prepared witness testimony from yesterday's hearing, view background information on the Commission members or to see upcoming dates of activity, please click here: http://commission.abi.org/

Bankrupt Hostess Brands Inc., the maker of Twinkies, is in talks with potential buyers and unions as it tries to stave off liquidation of the once-iconic American baked goods company, Reuters reported yesterday. The outcome was far from certain as any deal to sell the company would hinge on Hostess' success in resolving labor issues. Industry analysts believe that private-equity firms are likely suitors, while Hostess's brands could also be a target for food companies such as Mexico's Grupo Bimbo and U.S. baker Flower Foods Inc., which on Thursday was looking for acquisitions in the industry. Hostess this month warned its 18,500 employees that they may be laid off by mailing notices. Hostess will go back to bankruptcy court on June 5 for a trial on whether it can reject deals with 10 smaller unions, covering collective bargaining agreements for nearly 1,200 employees.