A report by a court-appointed independent examiner into dealings between Residential Capital LLC and the bankrupt lender's parent, Ally Financial Inc., has been filed under seal, a lawyer for the examiner said yesterday, Reuters reported. The report is expected to clarify if ResCap creditors are owed up to $25 billion by Ally for allegedly stripping ResCap of valuable assets before it filed for bankruptcy. The report will be unsealed if ResCap creditors and Ally fail to reach a settlement agreement by 11 a.m. Tuesday, the bankruptcy court was told yesterday. ResCap creditors have alleged they could be owed billions of dollars by Ally because it stripped valuable assets from ResCap prior to its bankruptcy.
After a century and a half of uncertainty, the U.S. Supreme Court yesterday finally decided the meaning of "defalcation," a word in the Bankruptcy Code that can refer to embezzlement but also, more generally, misuse of funds, Reuters reported yesterday. In a unanimous decision in Bullock v. BankChampaign, N.A., the court said yesterday that for a court to make a defalcation finding about a trustee, the person in question must be acting with gross negligence or have some knowledge that what he or she is doing is improper. The court handed a victory to Randy Bullock, an Illinois man who filed for bankruptcy. Bullock wanted to discharge debt concerning money he owes for his role overseeing his father's life insurance trust. He used money from the trust to make investments for himself and other family members. He eventually paid the money back with interest. The question before the court was whether Bullock's actions, which did not deprive the trust of any money, fit within the legal definition of defalcation. The court did not make a final determination on that point, instead remanding the case back to the district court so that the new definition of defalcation can be applied. http://newsandinsight.thomsonreuters.com/Bankruptcy/News/2013/05_-_May/…
A bankruptcy court judge yesterday approved the Revel Casino's chapter 11 reorganization plan that wipes out most of its debt and provides new money for it to operate, the Associated Press reported yesterday. Bankruptcy Judge Judith Wizmur approved Revel's plan to grant an 82 percent ownership stake to lenders in return for canceling $1.2 billion worth of debt. Revel's annual interest payments will fall from $102 million to $46 million. The casino plans to put money that previously went toward debt to operations now. Before filing for chapter 11 protection in March, Revel had $1.52 billion in debt. Upon its exit from bankruptcy court, which could happen within days, it will have $272 million in debt.
Peabody Energy Corp. is fighting former unit Patriot Coal Corp.'s attempt to bolster its assertion that its 2007 spinoff was fraudulent by gaining access to documents from Duff & Phelps and Morgan Stanley, which served as advisers on the transaction, Dow Jones Daily Bankruptcy Review reported today. In two separate court objections, Peabody is requesting that Patriot be denied information that is unrelated to the 2007 spinoff or would fall under attorney-client privilege or other similar protections. Peabody is also asking that no documents be produced by either firm related to its arrangements with American Electric Power or that would disclose information to the United Mine Workers of America until it enters a confidentially protective order.
A federal bankruptcy watchdog filed a rare letter defending her personal role in negotiating settlements to resolve a professional fee dispute in GSC Group Inc.’s chapter 11 case, the Wall Street Journal reported today. In an eight-page letter addressed to Bankruptcy Judge Shelley C. Chapman, U.S. Trustee Tracy Hope Davis responded to the “concerns” the court raised about the trustee’s role in a settlement process that has taken several twists and turns in recent months. “The UST has endeavored to handle this matter with the utmost integrity and professionalism and in compliance with the court’s guidance and rulings,” Davis wrote. “The UST regrets any confusion that has arisen over the course of many hearings and conferences held in this case and hopes that the UST has satisfied the court’s concerns.” GSC Group, an investment manager whose funds targeted distressed debt as well as U.S. and European corporate debt, sought chapter 11 protection in August 2010 and eventually sold its assets to Black Diamond Capital Management LLC. Its case heated up earlier this year, when Davis claimed that law firm Kaye Scholer LLP and financial adviser Capstone Advisory Group LLC hid conflicts of interest and fee-sharing agreements, and also made “inaccurate and incomplete” disclosures. The trustee settled the allegations, but Capstone’s deal later fell apart, paving the way for a trial to go forward last month on the advisory firm’s conduct.
The House Financial Services Oversight and Investigations subcommittee will hold a hearing on Wednesday at 10 a.m. ET titled “Who Is Too Big to Fail: Does Title II of the Dodd-Frank Act Enshrine Taxpayer-Funded Bailouts?” The witness list includes Prof. David A. Skeel of the University of Pennsylvania Law School, Dr. John B. Taylor of Stanford University, Josh Rosner of Graham Fisher & Co. and Michael Krimminger of Cleary Gottlieb. For more information, please click here: http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=33…
The U.S. Trustee Program is expected to unveil the first overhaul in nearly 17 years of the guidelines intended to keep bankruptcy costs in check on July 1, the Wall Street Journal reported today. The effort aims to tamp down on fee and expense applications submitted by attorneys for corporate debtors and sometimes creditors. The challenges come from the U.S. Trustee Program, the wing of the Department of Justice that monitors bankruptcy cases, as well as some bankruptcy judges. Spurring the effort to alter the guidelines are concerns that unjustified costs can give the impression that professionals are billing for money that rightly belongs to the people and businesses they are serving. The U.S. Trustee Program has attempted to curb fees and expenses for decades, but with the guidelines, under review for at least the last 18 months, it is refocusing its sights. "Evidence of improper expense reimbursements, even small ones (e.g., a professional billing an estate for a pack of chewing gum), reinforces the perception of abusive billing," according to a 2011 paper on bankruptcy fees co-written by U.S. Trustee Program Director Clifford J. White III. "While such reimbursements are frequently dismissed as isolated mistakes, the picture that emerges can be one of professionals who see the bankruptcy estate as an easy source of revenue." The proposed guidelines, which are expected to apply to attorneys in bankruptcy cases with $50 million or more in assets or liabilities, have gone through two drafts so far. Among the proposals: Expenses should be prorated where appropriate, and applicants shouldn't request reimbursements for "overhead" such as word processing and phone calls. The updated guidelines will be posted on the program's website and published in the Federal Register, and are expected to go into effect a few months later, according to the U.S. Trustee Program.
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.
Bankruptcy Judge Robert Drain said yesterday that he is prepared to let creditors vote on Reader’s Digest Association Inc.’s chapter 11 exit plan, which would give control of the company to a group of bondholders, Dow Jones Daily Bankruptcy Review reported today. Judge Drain approved the Reader’s Digest’s disclosure statement after it negotiated with creditors to give them better recoveries.
A court filing showed that the liquidator of Bernard Madoff’s firm asked a judge to approve $50 million of fees and expenses for his law firm’s work from July 1 through Nov. 30, Bloomberg News reported yesterday. Irving Picard and his firm, Baker & Hostetler LLP, will have charged total fees and expenses of about $440 million since the Madoff’s December 2008 arrest, according to court filings. The Securities Investor Protection Corp., which runs an insurance fund to compensate investors for losses, pays the law firm’s bills.
