A decades-old whistleblower lawsuit that prompted Congress to change the law that is intended to expose corporate fraud on the government is still haunting the remnants of the old General Motors—and is holding up the distribution of $50 million to the bankruptcy estate's creditors, Dow Jones Daily Bankruptcy Review reported today. The trust administering parts of GM left behind in its 2009 chapter 11 case is asking a bankruptcy judge to weigh in on the suit in order to free up cash for the automaker's creditors.
A judge ruled that Citigroup Inc. can be granted a $1.2 billion claim against Lehman Brothers Holdings Inc.’s defunct brokerage and will pay an affiliate of the Lehman parent $167 million to settle a dispute over amounts owed on foreign-exchange transactions, Bloomberg News reported yesterday. The disputes arose from Citigroup’s role in clearing and settling foreign exchange transactions for Lehman and its affiliates before and during the week of Lehman’s September 2008 bankruptcy. Larger sums than those settled remain in dispute, the parties said in the document, published in an order signed yesterday in federal court in Manhattan. The dispute with Citigroup is Lehman Brothers Holdings Inc. v. Citibank N.A, 12-0l044, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
A group of unsecured creditors has struck a deal with Johnson Controls Inc. to settle disputes stemming from the auto-parts maker's thwarted bid for A123 Systems Inc.'s assets, Dow Jones Daily Bankruptcy Review reported today. The deal brings an extra $200,000 in cash into the bankrupt entity's coffers and brings to an end months of disputes.
Creditors of bankrupt Residential Capital LLC are nearing a deal to settle billions of dollars of claims against the mortgage lender's parent, Ally Financial Inc., a development that prompted a delay in a much-anticipated report on ResCap's failure, Reuters reported on Friday. A mediator overseeing talks between Ally and ResCap creditors asked that an independent examiner postpone his report on claims that Ally should be held responsible for up to $25 billion of ResCap liabilities, according to a court filing. That report was expected to be published last week, but the examiner's attorney said in a court filing on Friday that the report will now be published today. Creditors of ResCap are pursuing billions of dollars of cash that Ally had raised by selling its international business and planned to use to repay the remaining $11 billion of a U.S. government bailout.
The trustee liquidating Peregrine Financial Group Inc. is weighing whether to sue two banks that handled accounts for the defunct brokerage firm, Dow Jones Daily Bankruptcy Review reported today. Trustee Ira Bodenstein sees "a number of viable claims" against U.S. Bank and J.P. Morgan Chase & Co., though no decision has yet been made to pursue the banks, according to a court document filed on Wednesday.
A report to be released today could embolden creditors of bankrupt mortgage lender Residential Capital LLC to pursue billions of dollars of cash that its parent, Ally Financial Inc., had planned to use to repay a U.S. government bailout, Reuters reported today. The report by a court-appointed examiner deals with allegations of improper activity before the ResCap bankruptcy, including claims that Ally Bank was stripped from ResCap. ResCap creditors have said that Ally, which is about three-quarters owned by the U.S. government, could be on the hook for up to $25 billion owed to them by ResCap. Former bankruptcy judge Arthur Gonzalez was appointed by a bankruptcy court last year to examine the pre-bankruptcy deals between Ally, ResCap, Ally investor Cerberus Capital Management LP and others. Gonzalez also investigated the negotiations that led to Ally's initial proposed settlement, which was rejected by ResCap creditors.
U.S. Trustee Roberta A. DeAngelis is objecting to casino owner Revel AC Inc.'s restructuring plan, taking aim at "expansive" provisions meant to shield everyone from lenders to equity holders from liability, Dow Jones Daily Bankruptcy Review reported today. DeAngelis on Tuesday urged a judge to stop a proposed debt-for-equity swap in its tracks unless certain tweaks are made to the company's chapter 11 exit plan. In particular, the trustee took aim at exculpation and release provisions that Revel wants to hand a host of parties.
Citigroup Inc. has sued Barclays Plc to recover more than $141 million for providing foreign exchange services to a unit of Lehman Brothers Holdings Inc. soon after Lehman's bankruptcy, Reuters reported yesterday. The complaint filed on Monday in U.S. District Court related to Citigroup's role in the Continuous Linked Settlement system, which was designed to ensure that foreign exchange trades are completed. Citigroup said that it sought to stop settling trades for Lehman's brokerage unit on Sept. 17, 2008, two days after Lehman went bankrupt, because it was incurring large losses. But Barclays was then in the process of buying Lehman's U.S. broker-dealer business, and, according to the complaint, urged Citigroup to keep providing the services. It also agreed to indemnify it for losses between Sept. 17-19, 2008.
Residential Capital LLC is suing a group of junior bondholders to block them from wresting control of the subprime mortgage lender's bankruptcy case, Dow Jones Newswires reported yesterday. In a lawsuit filed on Friday evening in bankruptcy court, ResCap sued the bondholder group—dubbed the ad hoc group of junior secured noteholders—asking a judge to reject their claims on some of lender's assets securing the bonds. Lawyers for ResCap, a subsidiary of government-owned lender Ally Financial Inc., say that the bondholders are attempting to take over the chapter 11 case by manufacturing an "oversecured" position that would entitle them to hundreds of millions of dollars in interest payments. At issue is the bondholders' claim that they're owed $2.2 billion in principal and interest, which includes so-called post-petition interest accruing at about $250 million a year. ResCap's lawyers, however, said that the value of the collateral securing the bonds is only $1.5 billion. If so, that means the bondholders are under-secured and thus not entitled to interest payments. http://www.foxbusiness.com/news/2013/05/06/rescap-sues-bondholders-over…
In related news, Residential Capital LLC Chief Executive Thomas Marano has resigned as the mortgage subsidiary of auto lender Ally Financial Inc. works its way out of bankruptcy, Reuters reported yesterday. Marano, who joined ResCap in 2008, will remain as a member of the board. Marano spent more than 25 years at now-defunct investment bank Bear Stearns & Co., where he was the global head of mortgage and asset-backed securities. Marano was managing director at Cerberus Capital Management before moving to ResCap. ResCap filed for bankruptcy in May 2012 to protect its parent from mortgage liabilities that threatened to swamp the company. Ally is 74 percent-owned by the U.S. government after a series of bailouts. http://www.reuters.com/article/2013/05/06/rescap-ceo-resignation-idUSL3…
Eastman Kodak Co. filed a chapter 11 plan that cratered the stock and bumped up the unsecured notes, although the plan may be revised to pay off second-lien debt fully in cash, as Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle discuss on their video. Next, Rochelle and Pacchia address a decision by a Delaware bankruptcy judge in the reorganization of School Specialty Inc. apparently holding that no make-whole premium will ever be too large for approval. They then discuss the U.S. Supreme Court’s decision not to review a decision dismissing an appeal from a confirmation order approving the Charter Communications Inc. chapter 11 plan. The final item is an opinion telling lawyers for consumer bankrupts how they can violate ethical rules when signing clients to flat-fee arrangements. Click here to watch the video.
