Upon bankruptcy court approval of a $1.8 million loan, Greek Peak Mountain Resort will become one of the first recipients of bankruptcy financing from the FDIC to keep it alive during its restructuring, the Wall Street Journal reported today. The FDIC will also keep the loan under its control for at least the length of the Greek Peak's chapter 11 case after the agency inherited the resort's debt when its lender Tennessee Commerce Bank failed and the FDIC took the bank, and the resort's debt, into receivership
Bankruptcy Court Judge Shelley C. Chapman yesterday extended a critical document discovery deadline to September 28 from September 11 in the LightSquared bankruptcy proceedings, Reuters reported. A group of lenders holding over $1.08 billion of secured debt at LightSquared LP, the company's main operating subsidiary, seeks to investigate the propriety of a $279 million loan extended to the holding company for LightSquared last July. At the heart of the issue is whether this loan constitutes an "insider transaction" that can be challenged, which could result in redistributing economics to other lenders. Harbinger was the key provider of this loan.
Solyndra LLC, the bankrupt solar-panel maker that received a $535 million U.S. Energy Department loan guarantee, reached a $3.5 million settlement with former workers who claimed they received inadequate layoff notices, Bloomberg News reported yesterday. The settlement will resolve allegations that the company failed to give employees 60 days' notice under the Worker Adjustment and Retraining Notification Act when it fired most of its 1,100 workforce on Aug. 31, just before seeking bankruptcy court protection last year. Solyndra will set up a $3.5 million fund to be distributed to the workers two weeks after the settlement is effective, according to court papers. The settlement was jointly proposed by Solyndra and the ex-employees.
Eastman Kodak extended its patent auction yesterday saying that it would not announce a winner as planned because it was still in discussions with bidders, Reuters reported yesterday. Kodak, which has lost more than $600 million so far this year, began an auction of 1,100 digital patents last Wednesday. It had been scheduled to designate a winner on Monday ahead of a Manhattan Federal Bankruptcy court hearing on Aug. 20. The company would use the money from the sale to pay back investors as it has borrowed nearly $700 million in bankruptcy financing.
Electronic bingo company GameTech International Inc. is asking a bankruptcy court to approve bid rules that name its secured lender as the lead bidder at an auction next month, Dow Jones DBR Small Cap reported today. Yuri Itkis Gaming Trust's bid for GameTech is a credit bid, which exchanges the $16 million GameTech owes the trust for all of GameTech's assets and provides an additional $2.5 million in bankruptcy financing to keep the company running during its chapter 11 case.
Capitol Bancorp Ltd. sought bankruptcy protection in a bid to implement a debt-for-equity swap, warning that its community banks are "dangerously close" to an FDIC takeover, Dow Jones DBR Small Cap reported today. Under the company's proposed reorganization plan, holders of nearly $6.82 million outstanding in senior notes would receive stock in the reorganized company valued at $6.82 million. Holders of $151.3 million outstanding in trust preferred securities would receive new stock valued at about $50 million.
A new bankruptcy study by two university professors found that incentive bonus plans for managers of bankrupt companies "significantly improve" outcomes for creditors, the Wall Street Journal's Bankruptcy Beat Blog reported on Friday. "Firms that adopt these plans—especially the incentive plans—are more likely to emerge, have shorter duration in restructuring and are less likely to violate the absolute priority rule under bankruptcy law," said Wei Wang, an assistant professor of business at Queen’s University. The study titled "Provision of Management Incentives in Bankrupt Firms" looked at 417 large public companies that filed for chapter 11 between 1996 and 2007. Of those, about 39 percent offered retention and incentive plans to key employees and the researchers looked at what effect, if any, those plans had on the outcomes of the bankruptcy cases. Wang, who co-authored the study with Vidhan K. Goyal, a finance professor at the Hong Kong University of Science and Technology, also said that the research does not support the common view among many bankruptcy observers that bonus plans enrich managers at the expense of creditors. On the contrary, creditor control—for example, when a hedge fund or lender is directing the bankruptcy case—increases the likelihood that bankrupt firms offer retention and incentive bonuses to managers, he said. Wang added that while it is true that retention plans did not have any impact on chapter 11 cases, companies that adopted incentive bonuses spent less time in bankruptcy and were in better shape when they emerged. To read the study, please click here: https://www.documentcloud.org/documents/408293-kerpaugust8.html
The U.S. Postal Service on Thursday reported a $5.2 billion quarterly loss and said it was nearly out of cash and likely to exhaust its government credit line in coming months, The Wall Street Journal reported yesterday. The agency said the loss is its widest since it began releasing quarterly financials in 2007, but Postmaster General Patrick Donahoe said that the Postal Service will do whatever it takes to maintain its operations, even if that means defaulting on a second multi-billion-dollar retiree obligation in as many months. The Postal Service's loss for its third quarter ended June 30 compared with a $3.1 billion loss for the like period a year earlier. Donahoe said that the Postal Service would pay its employees and critical vendors but might skip some payments to others. The Postal Service defaulted for the first time in its history on Aug. 1, failing to pay $5.5 billion for future retiree health benefits. A similar $5.6 billion payment is due at the end of next month. The agency said it wouldn't make that either, unless Congress acts.
Knight Capital Group Inc., the market maker that was driven to the verge of bankruptcy after a trading error, said that last week's mishap may cause more losses, Bloomberg News reported yesterday. Should its customers and trading partners lose confidence, Knight's reputation and business may suffer, the Jersey City, N.J.-based firm said in a government filing. Knight Chief Executive Officer Thomas Joyce estimated the firm's trading loss will be $270 million after taxes, according to a letter to clients, compared with a previously reported pretax loss of $440 million. Knight was saved from collapse on Aug. 6, when it received a $400 million cash infusion through the sale of convertible securities to a consortium of investors.
Apple Inc., which lost part of a court fight with Eastman Kodak Co. this month when Bankruptcy Judge Allan Gropper denied its ownership claim of two digital image patents, was given approval by Judge Gropper to seek an appeal of his decision, Bloomberg News reported yesterday. Bankrupt Kodak sued Apple in June, accusing the iPhone maker of trying to disrupt an auction of more than 1,000 patents that started yesterday. A judge in Manhattan ruled in favor of Kodak on two of 10 patents claimed by Apple, which Kodak plans to sell as part of its restructuring. Judge Gropper told Apple yesterday that it can ask for a review of the ruling before it becomes final, initiating a interlocutory appeal. He declined to authorize an immediate appeal because federal policy was against "piecemeal appeals."
