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Chilton Wants CFTCs Own Attorney in MF Global Case

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A U.S. futures regulator said that he wants to see his agency hire its own attorney in Britain to help recover customer funds lost during MF Global's chaotic final days, Reuters reported on Friday. Bart Chilton, a member of the U.S. Commodity Futures Trading Commission (CFTC), said that he wondered whether attorneys hired in Britain, by a trustee liquidating the failed commodities brokerage, would effectively represent futures customers. "I believe we need to have our own counsel in the UK," Chilton said. "I'm no longer convinced that our interests are aligned, and out of an abundance of caution and concern that we are doing all that we can to protect customers' money, I think we should have our own UK counsel." James Giddens, the court-appointed trustee, estimates that MF Global clients have lost as much as $1.6 billion in funds, some of which is tied up in the United Kingdom.

Judge Rules for Vitro Bondholders in Bankruptcy Case

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Bankruptcy Judge Harlin D. Hale yesterday refused to enforce Mexican glass maker Vitro SAB's controversial debt restructuring in a closely watched chapter 15 case that threatened to sever the cross-border business cooperation between the two nation's legal systems, the Wall Street Journal reported today. Judge Hale sided with bondholders in rejecting Vitro's bid, saying that Vitro's Mexican restructuring plan, which extinguishes guarantee claims of the U.S. bondholders, "manifestly contravenes the public policy of the United States and is also precluded from enforcement under...the Bankruptcy Code." Vitro thinks Judge Hale's ruling concerning the third-party releases of the guarantees involves a narrow issue of U.S. law and intends to appeal the ruling.

Defendants Say Bankruptcy Judges Should Not Hear Madoff Suits

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Bankruptcy judges cannot rule or recommend rulings on fraudulent-transfer suits by the liquidator of Bernard L. Madoff's brokerage under the U.S. Constitution, defendants said in a brief to U.S. District Judge Jed S. Rakoff in New York, Bloomberg News reported yesterday. Suits that aim to "augment" a bankrupt firm's estate are based on common-law claims and by law require a ruling by a district judge, they said on Monday in the filing. Judge Rakoff ruled in May, in a case involving the Refco litigation trust, that bankruptcy judges do not have power to make final rulings on claims for fraudulent transfers and unjust enrichment. His law clerk sent the decision, which cited a U.S. Supreme Court's ruling in Stern v. Marshall, to lawyers for the Madoff trustee and defendants in related lawsuits, according to an e-mail obtained by Bloomberg. Bankruptcy judges can issue reports and recommendations to district judges, Rakoff said in the Refco opinion.

Barclays Battle With Lehman Unit Brings 5.5 Billion

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Barclays Plc. has won as much as $5.5 billion from the liquidator of Lehman Brothers Holdings Inc.'s brokerage since buying the defunct investment bank’s North American business more than three years ago, Bloomberg News reported yesterday. A federal judge on Tuesday told the brokerage to pay Barclays what it owed, saying that the final sale documents showed the parties' true intent. Trustee James Giddens originally demanded $7 billion from Barclays, saying that he had not read last-minute changes to the contract in the September 2008 chaos after the Lehman parent filed the biggest bankruptcy in U.S. history. U.S. District Judge Katherine Forrest ordered Giddens to pay London-based Barclays $1.1 billion and renounce his claim to $1.5 billion in margin assets backing trading operations that Barclays took over from Lehman. In confirming part of a lower-court decision, Forrest cost Giddens a total of $3.5 billion in margin and $2 billion in clearance-box assets, held to clear trades, the trustee said on Tuesday.

Dynegy Receives Approval for Deal Involving More Than 2.5 Billion in Claims

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Bankruptcy Judge Cecelia Morris on June 1 approved a deal that will resolve more than $2.5 billion in claims of Dynegy Inc.'s bankrupt subsidiary, Dynegy Holdings LLC, the Deal Pipeline reported yesterday. Under terms of the deal, the debtor will give unsecureds 99 percent of the common equity in the reorganized company. That deal is a departure from the debtor's earlier plan, under which unsecured creditors would have received $1 billion in new 11 percent senior secured notes due 2018 issued by Dynegy Inc. and $2.1 billion in preferred stock in Dynegy Inc. But under the mediated deal, the unsecureds will now get $200 million in cash as well as nearly all the reorganized equity, according to an April 4 statement. Dynegy Holdings would hold onto the other $200 million in cash for "general corporate purposes."

Supreme Court Rules in Favor of Credit-Bidding in the RadLAX Case

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ABI Bankruptcy Brief | May 29, 2012


 


  

May 29, 2012

 

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  NEWS AND ANALYSIS   

SUPREME COURT RULES IN FAVOR OF CREDIT-BIDDING IN THE RADLAX CASE



The U.S. Supreme Court ruled today that a secured creditor cannot be denied the right to credit-bid involving the sale of property or other assets as part of a bankruptcy reorganization plan, Reuters reported. The justices unanimously affirmed a Seventh Circuit decision and decided the issue after some lower courts (notably the Third Circuit) in recent years confirmed chapter 11 plans that provided for the sale of assets while denying the secured creditor the right to credit-bid. Debtors argued in the RadLAX case that credit-bidding discourages third parties from participating in the auction. Creditors argued that denial of their right to credit-bid is proscribed by §1129(b)(2) of the Code. In reading the opinion from the bench, Justice Antonin Scalia wrote for the majority that, under the plain language of the statute, a debtor may not obtain confirmation of such a chapter 11 plan that provides for the sale of collateral free and clear of the bank's lien, but does not permit the bank to credit-bid at the sale. Click here to read the full opinion.

Having already examined the oral argument in a previous ABI media teleconference, panelists will reconvene for an ABI and West LegalEd Center webinar on June 26 to discuss today’s Supreme Court ruling in RadLAX Gateway Hotel LLC v. Amalgamated Bank. CLE credit will be available for the webinar, which will be held from 2:00-3:30 p.m. ET.

Experts on the program include:

David Neff of Perkins Coie LLP (Chicago), the counsel of record for petitioner RadLAX Gateway Hotel LLC and participant in the argument.

Jason S. Brookner of Andrews Kurth LLP (New York), whose article was cited in the brief for the respondent.

• Prof. Charles Tabb, the Alice Curtis Campbell Professor of Law at the University of Illinois College of Law, who recently published a paper titled "Credit Bidding, Security, and the Obsolescence of Chapter 11."

ABI Resident Scholar David Epstein will be the moderator for the webinar.

The webinar costs $115 and purchase provides online access for 180 days. If you are purchasing a live webcast, you will receive complimentary access to the on-demand version for 180 days once it becomes available. Click here for more information.

U.S. WINDS DOWN LONGER BENEFITS FOR THE UNEMPLOYED



Hundreds of thousands of out-of-work Americans are receiving their final unemployment checks sooner than they expected, even though Congress renewed extended benefits until the end of the year, the New York Times reported today. The checks are stopping for the people who have the most difficulty finding work: the long-term unemployed. More than five million people have been out of work for longer than half a year. Federal benefit extensions, which supplemented state funds for payments up to 99 weeks, were intended to tide over the unemployed until the job market improved. Congress renewed the program in February, when it was set to expire, but also phased in a reduction of the number of weeks of extended aid and effectively made it more difficult for states to qualify for the maximum aid. Since then, the jobless in 23 states have lost up to five months’ worth of benefits. Next month, an additional 70,000 people will lose benefits earlier than they anticipated, bringing the number of people cut off prematurely this year to close to half a million, according to the National Employment Law Project. Read more.

ANALYSIS: COLLEGE DROPOUTS HAVE DEBT, BUT NO DEGREE



As the nation amasses more than $1 trillion in student loans, education experts say that a vexing new problem has emerged: A growing number of young people have a mountain of debt but no degree to show for it, the Washington Post reported today. Nearly 30 percent of college students who took out loans dropped out of school, up from fewer than a quarter of students a decade ago, according to a recent analysis of government data by think tank Education Sector. College dropouts are also among the most likely to default on their loans, falling behind at a rate four times that of graduates. The plight of "non-completers" has grown in magnitude as student debt tops $1 trillion, according to the Consumer Financial Protection Bureau. In addition, the sputtering economy has forced a growing number of students to make difficult choices between the benefits of a degree and the burden of paying for it. More students are balancing their studies with full- or part-time jobs or signing up for a reduced course load to save money, increasing the likelihood that they will not graduate. Read more.

EUROPE TURNING TO U.S. FOR LOANS



In the latest symptom of Europe's financial turmoil, the region's riskier companies are bypassing banks and investors at home and turning to the U.S. for loans, the Wall Street Journal reported today. European companies borrowed some €14.4 billion (about $18 billion at current rates) in the U.S. leveraged-loan market this year through Friday, more than double the €6.7 billion for all of 2011, according to data from S&P Capital IQ LCD. That is the highest amount since at least 2007, the height of the last boom in leveraged lending, when full-year loan volume was €12.2 billion, according to S&P. The increased demand for European debt has been driven by a dearth of high-yielding options from U.S. companies, bankers say. Read more. (Subscription required.)

ABI IN-DEPTH

JUNE 5 WEBINAR WILL EXAMINE HOW TO HANDLE AN ADMINISTRATIVELY INSOLVENT ESTATE



Panelists from one of the top-rated sessions at the 2011 Winter Leadership Conference are going to reconvene for an ABI and West LegalEd Center webinar on June 5 titled, "Handling the Administratively Insolvent Estate- What to Do When Your Chapter 11 Goes South." CLE credit will be available for the webinar, which will last from 11 a.m. - 12:30 p.m. ET.

Speakers include:

Robert J. Feinstein of Pachulski Stang Ziehl & Jones LLP (New York)

Cathy Rae Hershcopf of Cooley LLP (New York)

Robert L. LeHane of Kelley Drye & Warren LLP (New York)

Robert J. Keach of Bernstein Shur (Portland, Maine) will be the moderator for the webinar.

The webinar costs $115, and purchase provides online access for 180 days. If you are purchasing a live webcast, you will receive complimentary access to the on-demand version for 180 days once it becomes available. Click here for more information.

LATEST CASE SUMMARY ON VOLO: GRUBER V. KAPLAN (IN RE KAPLAN; 3D CIR.)



Summarized by Julia Klein of The Rosner Law Group LLC

The Third Circuit affirmed the district court's order upholding the decision of the bankruptcy court denying the appellant's motion under Fed. R. Bankr. P. 8002(c) to extend the time to appeal and agreed with the district court's determination that appellant's due-process right to notice had not been violated.

More than 500 appellate opinions are summarized on Volo typically within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: FURTHER INSIGHT ON THE DEWEY & LEBOEUF FILING



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post further examines the chapter 11 filing yesterday of law firm Dewey & LeBoeuf LLP.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

The few “net winners” in a bankrupt Ponzi scheme should be required to turn over to the trustee any returns in excess of their original investment (with no special defenses or exceptions), to be distributed to the many “net losers” victimized by the scheme. Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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ABI'S "Handling the Administratively Insolvent Estate- What to Do When Your Chapter 11 Goes South" Webinar

June 5, 2012

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CS 2012

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July 12-15, 2012

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July 25-28, 2012

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ABI'S Webinar to Discuss the Supreme Court's Forthcoming Ruling in RadLAX Gateway Hotel LLC v. Amalgamated Bank

June 26, 2012

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MA 2012

August 2-4, 2012

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  CALENDAR OF EVENTS

June

- Memphis Consumer Bankruptcy Conference

     June 1, 2012 | Memphis, Tenn.

- ABI'S "Handling the Administratively Insolvent Estate- What to Do When Your Chapter 11 Goes South" Webinar

     June 5, 2012

- Central States Bankruptcy Workshop

     June 7-10, 2012 | Traverse City, Mich.

July

- Northeast Bankruptcy Conference and Northeast Consumer Forum

     July 12-15, 2012 | Bretton Woods, N.H.

- Southeast Bankruptcy Workshop

     July 25-28, 2012 | Amelia Island, Fla.

  

 

August

- Mid-Atlantic Bankruptcy Workshop

     August 2-4, 2012 | Cambridge, Md.

September

- Southwest Bankruptcy Conference

     September 13-15, 2012 | Las Vegas, Nev.

- Complex Financial Restructuring Program

     September 13-14, 2012 | Las Vegas, Nev.

October

- Bankruptcy 2012: Views from the Bench

     October 5, 2012 | Washington, D.C.

 
 

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ABI Tags

Bankruptcy Claims Trading Slowed Last Month

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New data indicates that distressed investors last month bought up the smallest amount of debt from ongoing bankruptcies in more than a year, Dow Jones Daily Bankruptcy Review reported today. SecondMarket Inc., which operates a market for buyers and sellers of claims filed in bankruptcy cases, said in a new report that $1.5 billion worth of claim transfers took place in April, the lowest dollar value of claims traded since February 2010. Some of that trickling off can be attributed to the fact that after several years of being a claims-trading hotbed, Lehman Brothers Holdings Inc. emerged from Chapter 11 protection and made its first payment to creditors in April. According to SecondMarket, more than $6.4 billion in Lehman claims were traded in the 30 days before March 18, the deadline for Lehman creditors to get their names on the list for payment, versus $1.1 billion in claims traded in the 30 days following that date.

ABI Tags

Tribune Seeks to Block Appeal Ward Off Delay in Chapter 11

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Tribune Co. has moved to block an appeal that could prolong a stay in bankruptcy that began in 2008 and might not be over until next year, Dow Jones Newswires reported yesterday. The Chicago-based company asked a bankruptcy judge to turn down a request from holders of a class of debt known as PHONES to challenge a decision that they say unfairly slashes their recoveries. The ruling PHONES holders want to attack came after Judge Kevin Carey rejected Tribune's last chapter 11 plan. The company wants to try again in June to win confirmation of a slightly revised restructuring plan that it hopes will ease it out of chapter 11 as property of big lenders.