The bankruptcy trustee for Bernard L. Madoff's investment firm filed an amended lawsuit against Madoff's two sons yesterday, adding detail to claims that the men were aware of the Ponzi scheme and actively worked to conceal it from the Securities and Exchange Commission by deleting, altering or hiding records during an audit, the Wall Street Journal reported today. The new complaint also seeks the return of more than $153 million that it says the brothers, who were executives at Madoff's securities firm, took improperly in the form of inflated bonuses and salaries, sham loans and fabricated trading profits. That is more than $16 million higher than a previous complaint by the trustee, Irving Picard. (Subscription required.) http://online.wsj.com/articles/madoff-bankruptcy-trustee-files-amended-…
Madoff trustee Irving Picard will be providing a keynote titled “Tales from the Madoff Bankruptcy” at ABI’s 34th Annual Midwest Bankruptcy Institute on Oct. 17. For more information or to register, please click here: http://www.abiworld.org/MW14/
The Houston Rockets and the Houston Astros need a new owner for the struggling television channel that broadcasts their games, and they want to keep the names of potential purchasers a secret for now, the Wall Street Journal reported today. In a request filed in bankruptcy court, officials teams asked a bankruptcy judge for permission to withhold the identity of potential buyers for Comcast SportsNet Houston from several members of the channel's board of directors. Comcast SportsNet Houston broadcasts games for two Houston professional sports teams — Major League Baseball's Astros and the National Basketball Association's Rockets — to only about 40 percent of Houston households. The network is available to Comcast Corp. subscribers but has had trouble persuading competitors such as DirecTV and Dish Network Corp. to carry the network in exchange for subscriber fees, which some have said are too high. Before the network's bankruptcy in September, Astros owner Jim Crane blamed Comcast, which manages the network, for failing to bring new deals to the table. But when Judge Marvin Isgur gave Crane and Rockets officials several months to ink new deals themselves, they weren't able to sign any major partners.
Philip Falcone’s LightSquared Inc. settled a fight with Dish Network Corp. Chairman Charles Ergen over more than $1 billion in debt he holds in the bankrupt wireless broadband company, taking it one step closer to exiting court protection, Bloomberg News reported yesterday. Details of a new chapter 11 plan will be filed within a week, Joshua Sussberg, a lawyer for a special committee of LightSquared, told Bankruptcy Judge Shelley Chapman at a court hearing yesterday. A dispute between the company and Ergen, its one-time suitor, scuttled a prior plan to reorganize. The deal with Ergen, which has yet to be completed, “will alleviate a significant burden and execution risk around the plan,” Sussberg said.
The House Judiciary Committee will hold a hearing Tuesday afternoon on bipartisan legislation ("The Financial Institution Bankruptcy Act of 2014") designed to use the Bankruptcy Code for the purpose of an orderly liquidation of a large financial institution. ABI members can get a preview of the new bill during a live webinar today at 1 pm (ET). Speakers for the webinar include Profs. Thomas Jackson of the University of Rochester and Stephen Lubben of Seton Hall Law School), both of whom will be testifying before the Committee. To register for today’s webinar, please click here: http://www.abiworld.org/webinars/2014/LEGIS/index.html
The bill would create a new subchapter V of chapter 11, where the assets of the financially-troubled institution would be transferred to a bridge company, while leaving its stock and long-term unsecured debt behind in the old institution, in a process referred to as "single point of entry” (SPOE). Work would begin to transfer ownership of the bridge holding company to the private sector. The left-behind subordinated debt of the troubled firm would be used as the immediate source of capital for the new entity. Remaining debt claims would be converted into equity claims that would also serve to capitalize the new private-sector entity.
The SPOE strategy is, in essence, a "bail-in" strategy because it implements a resolution process that imposes losses on shareholders and unsecured creditors, rather than on the deposit insurance fund, the government or the taxpayers. More specifically, holding company shareholders would bear the losses first and one would expect that they will be wiped out; holding company creditors will likely bear losses as well, and would receive equity in the newly reorganized holding company in place of the debt, reflecting the value of what remains in the holding company. A new board and management would be put in place.
The difference between a bailout and a bail-in is the source of funding. In a bail-out, the funds essentially come from outside the institution, usually in the form of taxpayer assistance via a direct intervention by the sovereign government. Conversely, in a bail-in, rescue funds come from within the institution as shareholders and unsecured creditors bear the losses.
The bill is an alternative to the Orderly Liquidation Authority of the Dodd-Frank Act, while not explicitly repealing it. OLA is controversial because some critics believe it could lead to a Federal bailout of systemically important financial institutions. The new bill does not provide explicit liquidity guarantees, such as a credit support facility, and is in this way similar to S. 1861. However the Senate bill also repeals Title II of Dodd-Frank. Speakers at the ABI webinar will compare and contrast the Senate bill as well.
The webinar, "Proposed Chapter 14 and the Future of Large Financial Institution Resolution," hosted by ABI's Legislation Committee, is a rare chance to hear leading experts on this important policy, now under active consideration in Congress. http://www.abiworld.org/webinars/2014/LEGIS/index.html
A bankruptcy judge on Friday pushed back a decision on a proposal to auction Atlantic City-based Revel Casino Hotel, which last month filed for chapter 11 protection while it searches for a buyer, Dow Jones Daily Bankruptcy Review reported today. During a bankruptcy court hearing, Revel and its unsecured creditors were unable to come to terms over disputes involving the right of Revel's lender to credit bid as well as the timeline for submitting bids.
A western Nebraska nonprofit corporation that provides social services says that it is filing for bankruptcy protection from its creditors, the Associated Press reported on Friday. The agency is Gering, Neb.-based Community Action Partnership of Western Nebraska and it runs more than 45 programs, including Head Start and a medical clinic. Its money comes from fees, grants, fundraising and government sources. Interim executive director Margo Hartman says that the intention is "to get this into a stable spot and keep providing services." Hartman said that there would be no immediate effect on employees or services but says some programs eventually could be eliminated if they aren't financially viable.
Court documents show that Crumbs Bake Shop Inc. may get a second chance if a bankruptcy judge approves a deal for the owner of Dippin' Dots ice cream and the star of a reality television show to buy and reopen the U.S. cupcake chain, Reuters reported on Saturday. Crumbs, which specialized in oversized cupcakes and went public in 2011, shuttered its nearly 50 locations in 10 states and the District of Columbia on July 7 and filed for chapter 11 protection on Friday. Part of the group seeking to buy the chain is Marcus Lemonis, star of CNBC reality show "The Profit" and known as the "business turnaround king." He, along with Fischer Enterprises LLC, the owner of Dippin Dots, would provide debtor-in-possession financing and subsequently buy the cupcake chain through a joint venture called Lemonis Fischer Acquisition Co., according to the document. They would reform Crumbs as a privately held company, reopen its stores and resume operations.
Philip Falcone’s Harbinger Capital Partners LLC filed a $2 billion lawsuit against the U.S., two years after the Federal Communications Commission refused to approve the wireless broadband service of his now-bankrupt LightSquared Inc., Bloomberg News reported on Saturday. The U.S. reneged on a March 2010 commitment under which Harbinger agreed to invest billions of dollars to build a network to government specifications, the New York-based investment firm said in a complaint yesterday in the U.S. Court of Federal Claims in Washington. LightSquared filed for bankruptcy in 2012 after the FCC declined to approve its service, saying that it might interfere with global positioning systems. Harbinger, which controls LightSquared for now, is seeking recovery of its $1.9 billion investment, along with unspecified damages, according to a copy of the complaint provided by a lawyer for Harbinger.
Love Culture Inc., a women’s-wear retailer with more than 80 stores, is preparing to file for bankruptcy in a New Jersey court, Bloomberg News reported on Friday. The chain will seek to continue operations and sell itself as a going concern. Love Culture was founded in 2007 by Jai Rhee and Bennett Koo, former executives at fast-fashion retailer Forever 21, with the aim of selling affordable style to young women. Lowenstein Sandler LLP and New York-based PricewaterhouseCoopers LLP are representing the company.
A bankruptcy auction is still weeks away, but the price of Optim Energy's Twin Oaks power plant continues to jump, with Texas giant Energy Future Holdings Corp. signaling it could go as high as $87.5 million for the facility, Dow Jones Daily Bankruptcy Review reported today. Optim is selling the coal-fired plant to help pay off its debts in chapter 11. The price, offered by Blackstone Group, started out at $60 million. On Wednesday, Energy Future told the bankruptcy court overseeing its own chapter 11 proceeding it may bid as much as $87.5 million for the facility near Bremond, Texas.
