The court-appointed trustee overseeing the liquidation of Thornburg Mortgage Inc. has reached a deal with Barclays Capital Inc. to settle a subprime-era lawsuit alleging the bank made improper margin calls that helped drive the mortgage lender into bankruptcy, Dow Jones Daily Bankruptcy Review reported today. According to the terms of the proposed settlement filed Wednesday in U.S. Bankruptcy Court in Baltimore, Barclays would pay the trustee $23 million for the benefit of Thornburg's creditors.
Lehman Brothers Holdings Inc.'s brokerage is asking a U.S. court to reconsider its ruling affirming Barclays PLC's right to billions of dollars in disputed assets, saying that the decision throws into question the integrity of bankruptcy sales, the Wall Street Journal reported today. The trustee unwinding the brokerage, Lehman Brothers Inc., on Tuesday asked the U.S. Court of Appeals for the Second Circuit for a new hearing before the entire bench of judges rather than a three-judge panel. Lawyers for the trustee, James W. Giddens, said that the decision increases Barclays' gain from its purchase of Lehman's brokerage in a 2008 bankruptcy court sale and will cut into the money that is available to pay the brokerage's creditors.
The Roman Catholic Diocese of Gallup, N.M., has asked a federal judge for an additional eight months under bankruptcy court protection to continue negotiations with more than 100 individuals who allege they were sexually abused by clergy members, Dow Jones Daily Bankruptcy Review reported today. The church's exclusivity period, during which sexual-abuse claimants or others are barred from filing their own reorganization proposals, is set to expire Sept. 8. Citing a plan to begin mediation in the fall, the diocese asked Judge David Thuma of the U.S. Bankruptcy Court in Albuquerque, N.M., to extend that period through May 12, 2015, giving it time to reach a settlement with victims and file a plan to exit bankruptcy without interference from outsiders.
Philip Falcone’s LightSquared Inc., the bankrupt wireless company, is again the subject of competing plans over how to reorganize its business, with a potential hearing in October to confirm a final plan, Bloomberg News reported yesterday. Bankruptcy Judge Shelley Chapman said yesterday that she would consider a date around Oct. 20 to weigh arguments over how to reorganize the company, which previously narrowed three plans down to one, only to see it fail to win court approval. Judge Chapman said that she may have to “pick between or among two or three confirmable plans” after Falcone’s investment firm, Harbinger Capital Partners LLC, filed a new plan today, four days after LightSquared filed its own. Mast Capital Management LLC has said that it may put forth its own proposal, which would split up the company and separately reorganize debt at the “Inc.” and “LP” divisions, which have different lenders and own different rights to wireless spectrum.
The finger-pointing over who was responsible for the collapse of Lehman Brothers continues nearly six years after the firm filed for bankruptcy at the height of the financial crisis, the New York Times DealBook blog reported yesterday. Now, an arbitration panel has dealt with the liability of one of those parties, finding no basis for a malpractice claim against Ernst & Young, the big accounting firm that audited Lehman’s books. The panel of three former judges ruled in April that it was Lehman’s management, not Ernst & Young, that was most responsible for setting in motion and maintaining a controversial accounting maneuver that allowed the firm to temporarily move tens of billions of dollars in debt off its balance sheet at the end of every quarter. The previously unreported ruling could complicate a pending lawsuit the New York attorney general’s office filed against Ernst & Young in 2010 over the collapse of Lehman. The lawsuit accused the company of helping Lehman engineer an accounting fraud that made it look less leveraged than it truly was in the months before its collapse in September 2008.
A U.S. bankruptcy judge has called a temporary truce in a fight between Nortel Networks Corp.’s U.S. division and the Canadian parent company over a $1 billion settlement with bondholders, the Wall Street Journal reported today. Judge Kevin Gross pushed off until October a planned September showdown over the settlement, which has to do with how much interest is owing on some $4 billion in bond debt issued by the former Canadian technology icon. The date has not been settled. However, whatever date is chosen, the judge wants the combatants in his chambers the evening before where they will be subjected to “a little bit of pressure.”
Lawyers for General Motors Co. customers are jostling to lead lawsuits over faulty ignition switches, Bloomberg News reported yesterday. Car owners suing over the lost value of recalled vehicles have yet to learn whether they can claim $10 billion, a few hundred thousand dollars, or nothing. That number will be decided later this year by Bankruptcy Judge Robert Gerber, who presided over GM’s bailout in 2009. Meanwhile about 100 delayed cases are in the hands of U.S. District Judge Jesse Furman in Manhattan. He told the customers yesterday at his first court conference that he will advance their suits as fast as possible, and encourage settlements, while at the same time try not to get in Judge Gerber’s way.
MF Global Holdings Ltd. is urging a judge not to toss its $1 billion lawsuit against PricewaterhouseCoopers LLP (PwC) for the alleged bad accounting advice that MF Global says led to its 2011 collapse, Dow Jones Daily Bankruptcy Review reported today. In a filing last week with the U.S. District Court in Manhattan, lawyers for the administrator in charge of MF Global fought PwC's argument that MF doesn't have the standing to sue PWC. PWC argued in a May court filing that only MF Global 's litigation trustee, who is in charge of pursuing certain lawsuits on behalf of creditors, has standing to file the suit. MF Global says its administrator also has the right.
The judge overseeing Nortel Networks Inc.’s bankruptcy said he may pressure creditors fighting over $7 billion to reach a deal in a closed-door meeting, Bloomberg News reported yesterday. Bankruptcy Judge Kevin Gross told U.S. bondholders and a monitor for Nortel’s Canadian parent in a court hearing on Friday that he wanted to meet with them for several hours and proposed an October date. Gross said that the meeting in his chambers won’t be a formal mediation session. “I am going to provide some direction and perhaps some pressure,” the judge told lawyers. The monitor for the bankrupt parent company and creditors in Canada and the U.K. have been fighting with U.S. bondholders and the bankrupt U.S. unit over how to split $7 billion in cash raised as Nortel liquidated its assets since filing bankruptcy in 2009. Judge Gross said that the meeting would be the night before a still unscheduled court fight between the bondholders and the Canadian monitor over a proposal to pay the bondholders as much as $1 billion in interest.
The Bill & Melinda Gates Foundation is looking to recover grant money from education technology company ConnectEDU, which sought bankruptcy protection in April, the Wall Street Journal reported today. In July 2013, the foundation awarded a nearly $500,000 grant to ConnectEDU to develop an interactive program to help students master literacy under the Common Core standards that many states use to guide how public school students are taught. The money came with some conditions, including a promise to only use the funds for the development of the new technology as well as a timeline requiring benchmarks to be met along the way. The grant, paid out in two installments, was set to expire this December. The project, however, got derailed earlier this year when ConnectEDU filed for chapter 11 protection, citing an estimated $33.7 million in liabilities and $17.7 million in assets. Since then, the Gates Foundation has tried to ensure that its grant money is kept in a separate account and that any unused portion will be returned to the organization, according to a court filing made this week.
