NEWS AND ANALYSIS
CONGRESS APPROVES STUDENT LOAN INTEREST PLAN
The millions of college students and parents who will borrow money from the federal government for the coming school year can plan on much lower interest rates than originally offered, as the U.S. House overwhelmingly voted 392 to 31 yesterday to approve a Senate plan that would allow interest rates to move with the financial markets, the Washington Post reported today. The plan now goes to President Obama for signature, who has already voiced his support. Undergraduates who take out federal loans for the coming school year can expect an interest rate of 3.86 percent, while the rate for graduate students will be 5.41 percent. The interest rate for PLUS loans, available to graduate students and parents of students, will be 6.41 percent. All of those rates are lower than the current fixed rates of 6.8 percent for Stafford loans and 7.9 percent for PLUS loans. These rates will apply to loans taken out since July 1 and will lock in for the lifetime of the loan. The plan calls for limits on how high the rates can go: 8.25 percent for undergraduates, 9.5 percent for graduate students and 10.5 percent for PLUS loans. Read more.
DETROIT
COMMENTARY: FOR DETROIT'S RETIREES, MICHIGAN'S PENSION PROMISE MUST BE KEPT
If all of Detroit's creditors and claimants are on the hook for a reduction in the $18.5 billion in debt and long-term liabilities they're owed, a fair settlement cannot be reached without accounting for the damage done in the process, to the city and to its people, according to an editorial today in the Detroit Free Press. Among the city's claimants, retirees are the most vulnerable, according to the editorial. Their payouts are meager -- an average of $30,000 a year for police and fire, $19,000 for other city employees -- but absolutely crucial to their survival. And even though the pension systems' elected leadership mismanaged funds, made poor investments and overstated the funds' health, to place the burden of the consequences of those missteps on recipients is a nightmare. If you're getting only about $1,600 a month -- now subject to state income tax -- even a small adjustment can be devastating. Many pensioners would have to turn to public assistance, lose their independence, or worse. The editorial insists that Detroit face up to its decades of financial mismanagement, support the idea that residents and services should be prioritized over the city's debts and liabilities, and accept that bankruptcy is the vehicle for that restructuring. A financially solvent Detroit bought at the expense of retirees' welfare and safety is an equation that doesn't balance. Read the full editorial.
Looking for court documents or the state statutes referenced in the Detroit bankruptcy case? The latest news stories and analysis? Audio and video of experts examining the issues of the case? ABI has all those items and more on ABI's Detroit Bankruptcy Resources webpage. As new developments break and filings are registered with the court throughout the proceeding, ABI's Detroit webpage will keep you up-to-date on the proceeding. Make sure to bookmark and regularly visit http://news.abi.org/detroit.
BLOOMBERG'S LATEST "BILL ON BANKRUPTCY" VIDEO: DETROIT COULD MEAN LITTLE FOR CREDITORS
How Detroit is dramatically different from any other municipal bankruptcy is the first topic of discussion on the video with Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle. To watch the video, please click here.
ANALYSIS: EMINENT DOMAIN BATTLE PITS HOMEOWNER AGAINST HOSPITAL
Robert and Patricia Castillo, a California couple who have already had their monthly mortgage payments cut by almost 60 percent, want the city of Richmond to reduce their debt further by using its powers of eminent domain. But that could be bad for hospitals in Missouri, according to a Bloomberg News analysis today. The Castillos owe $436,500 on two loans on a three-bedroom home that's now worth about $125,000. The hospitals are members of a mutual insurer that's among investors in the Pimco High Yield Fund, which owns a slice of the bonds backed by loans including the Castillos'. Richmond Mayor Gayle McLaughlin said "it's our community that's at stake here," and the eminent domain plan is needed to help her city stem its foreclosure crisis. At least a dozen cities still dealing with the fallout of the housing bust are studying proposals to confiscate home loans and write them down to help homeowners escape oversized debt burdens. Pacific Investment Management Co., which is known as Pimco and manages the world's largest bond fund, is among mortgage-securities investors organizing a coalition to take legal action to oppose the push. The program is advocated by Steven Gluckstern's Mortgage Resolution Partners LLC, which would provide services and arrange for private investment funds that would profit by buying the loans for less than property values and then reworking them. Read more.
BANKS FIND S&P TO BE MORE FAVORABLE IN ITS BOND RATINGS
Five years after inflated credit ratings helped touch off the financial crisis, the nation's largest ratings agency, Standard & Poor's, is winning business again by offering more favorable ratings, the New York Times DealBook blog reported today. S&P has been giving higher grades than its big rivals to certain mortgage-backed securities just as Wall Street is eagerly trying to revive the market for these investments, according to an analysis conducted for the New York Times by Commercial Mortgage Alert, which collects data on the industry. S&P's chase for business is notable because it is fighting a government lawsuit accusing it of similar action that occurred before the financial crisis. As the company battles those accusations, industry participants say that it has once again been moving to capture business by offering Wall Street underwriters higher ratings than other agencies will offer. Banks have shown a new willingness to hire S&P to rate their bonds and have tripled its market share in the first half of 2013. Its biggest rivals have been much less likely to give higher ratings. Read more.
SEC POISED TO ACT ON CEO PAY
A rule requiring public companies to disclose how much their chief executives are paid compared to average workers will be issued "in the near future," according to the chairwoman of the Securities and Exchange Commission (SEC), The Hill reported yesterday. "I hope that it is completed in the next month or two," Mary Jo White said at a Senate Banking Committee hearing on Tuesday. The rule was ordered under the Dodd-Frank Act in 2010, but has yet to be issued by the SEC. Democrats and union leaders who back the rule say it would help workers negotiate their salaries and expose patterns of income inequality. Business groups have opposed the requirement as overly burdensome, and worry that it could end up hurting companies by diverting money and resources to calculating the total benefits, overtime and other pay measures for all workers. Read more.
IN CASE YOU MISSED IT - abiLIVE WEBINAR DISCUSSING § 1111(b) ELECTION, PLAN FEASIBILITY AND CRAMDOWN ISSUES RECORDING IS NOW AVAILABLE!
If you were not able to attend ABI's recent abiLIVE webinar examining § 1111(b), a recording of the program is now available for downloading! Utilizing a case study, ABI's panel of experts explored the issues surrounding a lender's decision on whether or not to make an election under § 1111(b), plan feasibility and voting. The abiLIVE panel also walked attendees through the necessary mathematical analyses used to examine these issues. The 90-minute recording is available for the special price of $75 and can be purchased here.
abiLIVE WEBINAR ON AUGUST 20: HOW WILL THE NEW U.S. TRUSTEE FEE GUIDELINES IMPACT YOU?
The new U.S. Trustee Fee Guidelines will affect all attorneys and firms who work on larger chapter 11 cases filed on or after Nov. 1. ABI's Ethics & Professional Compensation Committee will present a panel of experts, including Clifford J. White, the director of the U.S. Trustee Program, to discuss some of the ways the new guidelines could change day-to-day operations in firms, issues relating to the new market rate benchmarks, and how these changes might alter insolvency practice. Register today to hear government, attorney and academic perspectives speak on this important and timely topic.
ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE MID-ATLANTIC BANKRUPTCY WORKSHOP NEXT WEEK
The 5th stop for the ABI Golf Tour is the Hershey Country Club, in conjunction with next week's Mid-Atlantic Bankruptcy Workshop. Final scoring to win the Great American Cup sponsored by Great American Group is based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event last week at Amelia Island, Fla.! There's no charge to register or participate in the Tour.
ABI IN-DEPTH
ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!
Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!
NEW CASE SUMMARY ON VOLO: THE WHITE FAMILY COMPANIES INC. V. SLONE (IN RE DAYTON TITLE AGENCY INC.; 6TH CIR.)
Summarized by Thomas DeCarlo
The Sixth Circuit ruled that funds constitute property of the debtor at the time of transfer for purposes of avoiding a fraudulent transfer. Provisional credit by the bank for a check deposited by the debtor to hold in trust for a third party amounted to a loan to the debtor when deposited check bounced. As the third party never actually conveyed any money to the debtor, there was nothing for the debtor to hold in trust.
There are more than 900 appellate opinions summarized on Volo, and summaries typically appear 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: MERCHANTS SCORE A WIN IN SWIPE FEE WAR
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines a federal judge's ruling that overturned the Federal Reserve's rule on debit card swipe fee caps, effectively stating that the central bank had set the caps too high.
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
A class of claims should not be considered impaired for purposes of § 1129(a)(10) if the impairment results from the plan proponents' exercise of discretion (i.e., artificial impairment) and not driven by economic need. (In re Village at Camp Bowie I LP).
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 43 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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