Hawker Beechcraft has asked for more time to file a plan to emerge from bankruptcy, the Associated Press reported on Friday. The Wichita, Kansas-based plane maker asked a bankruptcy court on Thursday to extend until at least Dec 29 the exclusivity period to file a chapter 11 plan. It also wants to extend until Feb. 27 the time to solicit acceptance of the plan from each debtor. Hawker Beechcraft says it needs more time to evaluate and pursue both emerging from bankruptcy as a stand-alone company and emerging through a third-party sale.
Restructuring professionals say that companies in bankruptcy court are increasingly facing off with Justice Department watchdogs over important matters such as court venue and executive bonuses, the Wall Street Journal reported today. U.S. Trustee recently objected to the venue choice made by Houghton Mifflin Harcourt Publishing Co., the educational publisher that in May filed for chapter 11 in Manhattan. The company sought to cut more than $3 billion in debt off its balance sheet through a plan supported by more than 90 percent of its creditors. The trustee thought that Boston-based Houghton Mifflin made the wrong venue choice and urged the judge to move the case. Yet Philip Dublin of Akin Gump Strauss Hauer & Feld LLP, who represented a group of the publisher's creditors, said a change of venue would jeopardize a crucial $500 million financing deal, leaving the company "with potentially no way out of bankruptcy." Restructuring professionals say the trustees' increasingly fastidious approach comes from the director of the U.S. Trustee Program, Clifford J. White III, who is vehement that trustees uphold the letter of the law and the integrity of the bankruptcy system. "The U.S. trustees' objectives are to preserve the integrity of the bankruptcy system," said Kenneth Klee of boutique bankruptcy law firm Klee, Tuchin, Bogdanoff & Stern LLP. "Sometimes in doing so it will not be in the best interest of a particular company."
Residential Capital LLC, the bankrupt mortgage lending unit of Ally Financial Inc, won court approval to pay $14.9 million in incentive payments to hold onto 191 key employees, Reuters reported yesterday. The company had sought to pay $10.8 million to 174 employees, which included people who work in the finance, legal, origination, technology and other operations. ResCap also sought to pay $4.1 million to 17 senior executives, not including CEO Thomas Marano.
The Fifth Circuit found in a decision on Friday that a U.S. Supreme Court ruling curtailing district courts' authority to award fee enhancements in fee-shifting cases does not apply to bankruptcies, Law360.com reported yesterday. “It's a very important case, it's one of the most comprehensive circuit court opinions on fee enhancements in bankruptcy, and it thoroughly reviews all of the precedent and broadly stands for the proposition that the bankruptcy courts will be given wide discretion in awarding fee enhancements, particularly where the creditors are paid in full,” said James F. Wallack of Goulston & Storrs PC, who represents CRG Partners. The decision — which affirmed a Texas bankruptcy court's $1 million fee enhancement award to CRG Partners Group LLC for its work on the restructuring of poultry producer Pilgrim's Pride Corp. — limits the application of the high court's 2010 ruling in Perdue v. Kenny A. ex rel. Winn, which U.S. Trustee William Neary had argued made the fee award improper. "There may be sound justifications for implementing a Perdue-like approach to the compensation of professionals ... but those justifications must be voiced to our en banc court, the Supreme Court or Congress," the three-judge panel wrote. "We hold that Perdue did not unequivocally, sub silentio overrule our prior precedent, and we are, therefore, bound to apply it." Click here to read the opinion: http://www.ca5.uscourts.gov/opinions/pub/11/11-10774-CV0.wpd.pdf
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
Dewey & LeBoeuf yesterday secured an extra two weeks of funding for its bankruptcy, giving the defunct law firm some leeway in trying to convince former partners to accept a settlement and avoid what could be years of litigation, Reuters reported yesterday. Bankruptcy Judge Martin Glenn in a court filing approved Dewey's request to extend its funding deadline - which would have lapsed yesterday - through Aug. 15. The request had the support of Dewey's lenders and it comes as Dewey tries to claw back payments made to its former partners, the proceeds of which would go toward paying back creditors.
RoomStore Inc. wants to pull the plug on its chapter 11 case and bring in a trustee to liquidate its remaining assets after sparring with its bankruptcy lender, Dow Jones DBR Small Cap reported today. The defunct furniture chain, which has already sold off its operating assets in a series of going-out-of-business sales, is asking a judge to convert its case to chapter 7 liquidation. Last week, the company received three letters from lender Salus Capital Partners LLC alleging events of default and outlining Salus's plans to take back its collateral, which amounts to substantially all of RoomStore 's remaining assets.
ABI's Commission to Study the Reform of Chapter 11 has released the names of nearly 130 corporate restructuring experts who have agreed to serve on one of 13 advisory committees to examine discrete current issues. The diverse group of professionals come from the backgrounds of law, finance and the judiciary. The lists of names can be found on the Commission's website. The thirteen advisory committees/study topics are: Administrative Claims, Critical Vendors and Other Pressures on Liquidity; Avoiding Powers; Bankruptcy Remote Entities, Bankruptcy-Proofing and Public Policy; Distributional Issues Under Plans; Executory Contracts and Leases; Financial Contracts, Derivatives and Safe Harbors; Financing Chapter 11; Governance and Supervision of Chapter 11 Cases and Companies; Labor and Benefits Issues; Multiple Enterprise Cases/Issues; Plan Issues: Procedure and Structure; Role of Valuation in Chapter 11 Cases; and Sales of Substantially all of the Debtor’s Assets, Including Going Concern Sales. The Commission is working to break down each study topic further into subtopics—a process intended to help advisory committees identify all potentially relevant issues and coordinate areas of potential overlap among study topics.
The Commission has announced a schedule of fall public hearings at major insolvency conferences, where interested members of the restructuring community can appear and provide testimony to the Commission or to one or more of the advisory committees. The hearings will be held at the NCBJ annual meeting on October 26, the TMA annual convention on November 3 and the Commercial Finance Association annual meeting on November 15. Other public hearing dates will be announced.
Cliffs Club & Hospitality Group Inc. is seeking to keep exclusive control over its chapter 11 case through Oct. 1 as it works to win court approval of a plan that would hand control of the company to an investor consortium led by Carlile Group, Dow Jones DBR Small Cap reported today. In court papers filed on Thursday, the company said it needs the extension to complete the plan and sale to the Carlile-led group, which emerged as the company's buyer after no one stepped forward to challenge it at a chapter 11 auction earlier this year.
When the next crisis brings a major financial firm to its knees, U.S. regulators will seize the parent company but allow its units around the globe to keep operating while the mess is cleaned up, according to a plan to be announced today from the Federal Deposit Insurance Corp., the Wall Street Journal reported. The equity stakeholders of the large bank or other financial firm will be wiped out, and bondholders will face losses as their holdings are swapped for equity in a new entity, as a part of the FDIC's plan. If several federal agencies and the Treasury Department agree to seize a firm, the FDIC will unwind the parent bank holding company of the faltering firm, placing it in receivership and revoking its charter. The firm's subsidiaries around the world would continue to operate, supported with liquidity the FDIC-held parent company can borrow from the government under the Dodd-Frank financial overhaul. Next, the FDIC would transfer most of the firm's assets and some of its liabilities into what's known as a "bridge company," according to FDIC officials. There, regulators would oversee a debt-for-equity swap akin to what occurs under a chapter 11 restructuring: Equity holders would be wiped out, but creditors would get equity in exchange for the claims they held. The company eventually would emerge from the process as a new, recapitalized private entity.
