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FITCH: SOME PAST CHAPTER 11 FILERS AGAIN AT RISK OF DEFAULT



US Airways Group Inc. and Great Atlantic & Pacific Tea Co. top a list of companies that restructured under chapter 11 but remain at risk of another default in the future, according to a new report by Fitch Ratings, Dow Jones Daily Bankruptcy Review reported yesterday. Fitch analysts Sharon Bonelli and Michael Simonton identified 31 companies that have defaulted in the past, whether via a bankruptcy filing, debt exchange or missed bond payment. Five publishing companies made the list, putting that industry most at risk of default. Building products companies came in second, with four in all. Read more. (Subscription required.)

COMMENTARY: A QUICK END TO TARP MEANS A SMALLER PAYOFF FOR TAXPAYERS



The federal government still holds investments in hundreds of small banks around the country in the Troubled Asset Relief Program (TARP), and in an effort to wind down TARP, the government is trying to sell off its holdings of preferred stock of the remaining smaller banks, according to a commentary yesterday in the New York Times DealBook blog. The problem, according to the commentary, is that the Treasury Department is not getting great bids on some of the bank paper, even on the shares of banks with strong profits and strong capital. When the government sold its holdings in MetroCorp Bancshares of Houston this month, the bank itself bought back most of it – at 98 cents on the dollar. Wilshire Bancorp of Los Angeles bought back its paper at 94 cents on the dollar. The Treasury Department sold preferred shares of Ohio-based First Defiance at 96 cents, and Peoples Bancorp of North Carolina at 93 cents. While all of these small banks are regarded as healthy, the taxpayers take the loss, according to the commentary. Read more.

FHFA: SECOND QUARTER U.S. HOUSING PRICES INCREASED MOST SINCE 2005 IN SECOND QUARTER



The Federal Housing Finance Agency (FHFA) reported that U.S. house prices jumped 1.8 percent in the second quarter from the previous three months, fueled by record-low mortgage rates and tight inventory, Bloomberg News reported today. The seasonally adjusted increase was the biggest since the fourth quarter of 2005, the FHFA said. Prices climbed 3 percent from a year earlier. The number of Americans who owed more than their homes were worth fell by about 400,000 in the second quarter, according to a report today by Zillow Inc. Read more.

MASSACHUSETTS FORECLOSURE PREVENTION ACT SIGNED INTO LAW



Massachusetts Governor Deval Patrick (D) on August 3, 2012, signed into law Massachusetts’ Foreclosure Prevention Law, according to a recent post on the Massachusetts Real Estate Law blog. The new law makes significant changes to existing foreclosure practices in Massachusetts, and also attempts to clean up the recent turmoil surrounding defective foreclosure titles after the U.S. Bank v. Ibanez and Eaton v. FNMA rulings. Provisions of the new law include:

• New requirement that mortgage assignments be recorded

• New mandatory requirement to offer loan modifications and mediation to qualified borrowers

• New Eaton foreclosure affidavit confirming ownership of note/mortgage loan

• Protection for third party buyers of foreclosed properties

The new Massachusetts law goes into effect on Nov. 1, 2012. Click here to read the full text of the law.

COMMENTARY: GOVERNMENT STILL FRUSTRATED BY GMAC



Among the companies that were bailed out by the federal government during the financial crisis, perhaps the most intractable is the company formerly known as the General Motors Acceptance Corp. (GMAC), according to a commentary in the New York Times DealBook blog yesterday. GMAC was the financial arm of General Motors, and in the years leading up to the financial crisis, it was also GM's most profitable unit. In 2005, desperate to raise cash, General Motors sold a 51 percent stake in GMAC to the private equity firm Cerberus Capital Management. During the financial crisis, however, the only way that GMAC staved off collapse was thanks only to a government infusion of $17.2 billion. The company was renamed Ally Financial and the Treasury Department now owns 73.8 percent of Ally, with Cerberus retaining an 8.7 percent stake. Almost since that time, the Treasury Department has wanted to rid itself of its Ally stake, according to the commentary. Ally filed for an initial public offering in March 2011, but it has so far languished in the face of a weak market and concerns over Ally itself. The Treasury Department has been paid back about $5.7 billion and still controls the company through its stock ownership and appointment of a majority of Ally's directors. Despite lingering concerns about Ally, the automobile sales market is recovering and Ally's auto finance operations turned a profit last year. But Ally is still suffering from legacy debts, according to the commentary primarily concentrated in its ResCap unit. Despite having “General Motors” as part of its former title, the company did not just finance automobiles, but was also one of the largest subprime housing lenders through its ResCap subsidiary. Read more.

ANALYSIS: BUYOUTS BOOM, BUT NOT LIKE 2007



Private-equity buyouts are back but with a twist—they are smaller and less flashy than in past booms, according to an analysis in today's Wall Street Journal. Emboldened by a flurry of activity, private-equity executives say that the buyout market is crawling back from the doldrums of the financial crisis, when the debt that fueled such deals disappeared and potential sellers were put off by low valuations. Private-equity firms have snapped up $64.7 billion worth of U.S. companies since January, the highest amount year-to-date since 2007, according to data provider Dealogic. Experts cite a range of reasons, from relatively inexpensive financing to a push by troubled European banks to sell assets. Activity could cool off for the rest of the year amid uncertainty over the global economy and the U.S. presidential election, according to experts. And unlike in 2007, a blockbuster year for private equity that witnessed a bevy of large buyouts for household names, the current targets are smaller and lesser known. Read more. (Subscription required.)

DON'T MISS THE "WHEN IS AN INDIVIDUAL CHAPTER 11 THE BEST FIT?" WEBINAR ON SEPT. 27!



Chapter 11 can offer significant relief for certain individuals who need a restructuring of their finances. Learn when and how to use this tool in a 75-minute live webinar on Sept. 27 at noon ET. An expert panel will guide you through a successful individual chapter 11 and discuss key issues such as plan confirmation, modification and treatment of future income and secured debt.

Panelists on the webinar include:

• James F. Molleur of the Molleur Law Office (Biddeford, Maine)

• John P. Fitzgerald, III, of the Office of the U.S. Trustee (Boston)

• Raymond J. Obuchowski of Obuchowski & Emens-Butler, PC (Bethel, Vt.)

• Jennifer Rood of Bernstein Shur (Manchester, N.H.)

This panel was the highest rated at ABI's Northeast Bankruptcy Conference in July. The webinar is available to ABI members for $75. To register, please click here.

ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: OKLAHOMA DEPARTMENT OF SECURITIES V. WILCOX (10TH CIR.)



Summarized by Daniel Glasser of Chipman Glasser, LLC

Reversing an earlier district court decision, the 10th Circuit held that debtors were entitled to a discharge of a claim related to debtors' unjust enrichment from proceeds of a Ponzi scheme, because such proceeds fell outside the exception in 11 U.S.C. § 523(a)(19) – judgments for the violation of securities laws. The Tenth Circuit held that the plain language of section 523(a)(19) is limited to the perpetrators of securities violations, not to debtors unjustly enriched by a third party's violation of the law. Chief Circuit Judge Briscoe, however, dissented. He disagreed with the majority’s reading of the statute and argued that at least one of the debtors was complicit in the Ponzi scheme.

There are more than 600 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: THE CONTRACTS CLAUSE VERSUS THE BANKRUPTCY CLAUSE: BANKRUPTCY COURT HOLDS BANKRUPTCY CLAUSE REIGNS SUPREME



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A new blog post examines a recent decision by the Bankruptcy Court for the Eastern District of California that affirmatively held that the contracts clause did not eclipse the bankruptcy clause in the chapter 9 case of Stockton, Calif. Shortly after Stockton filed for chapter 9 protection in June, a group of retired employees commenced an adversary proceeding to prevent termination of their benefits on the theory that the contracts clause of the Constitution prevented the city from reducing retiree health benefits.

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

Client matters left unfinished at a firm when it files for bankruptcy are the property of the defunct firm.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?



Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

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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Join our networks to expand yours.

September

- 7th Annual Golf and Tennis Outing

     September 11, 2012 | Maplewood, N.J.

- Complex Financial Restructuring Program

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

- Southwest Bankruptcy Conference

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

- 38th Annual Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization

     September 19-20, 2012 | New York, N.Y.

- "When Is an Individual Chapter 11 the Best Fit?" Live Webinar

     September 27, 2012

- American College of Bankruptcy's "Bankruptcy: Back to the Future" Program

     September 28, 2012 | Chicago, Ill.

October

- Nuts & Bolts for Young and New Practitioners - KC

     October 4, 2012 | Kansas City, Mo.

- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum

     October 5, 2012 | Kansas City, Mo.

- Bankruptcy 2012: Views from the Bench

     October 5, 2012 | Washington, D.C.

- Chicago Consumer Bankruptcy Conference

     October 8, 2012 | Chicago, Ill.

- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar

     October 15, 2012

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

November

- U.S./Mexico Restructuring Symposium

     November 7, 2012 | Mexico City, Mexico

- Professional Development Program

     November 9, 2012 | New York, N.Y.

- Detroit Consumer Bankruptcy Conference

     November 12, 2012 | Detroit, Mich.

- Winter Leadership Conference

     November 29 - December 1, 2012 | Tucson, Ariz.

OBAMA TO PUSH CONGRESS ON MORTGAGE RELIEF



President Obama yesterday called on Congress to act on home mortgage relief when it returns for a brief legislative session in September, The Hill reported today. The housing market is widely believed to be the most significant drag on the economy, and Obama was under fire in a recent New York Times front-page story for the inability of his administration to address the burden of homeowner debt. "We are going to be pushing Congress to see if it can pass a refinancing bill that puts $3,000 in the pocket of the average family that has not yet refinanced their mortgage," he said. The White House is supporting a trio of Senate Democratic bills that streamline refinancing:

• Sens. Robert Menendez (D-N.J.) and Barbara Boxer (D-Calif.) in May introduced the “Responsible Homeowners Refinancing Act of 2012.” The bill would streamline refinancing for Fannie Mae and Freddie Mac borrowers by eliminating upfront fees and appraisal costs, among other changes.

• Sen. Jeff Merkley (D-Ore.) has a bill called the “Rebuilding Equity Act” for loans of 20 years or less. It would require Fannie Mae or Freddie Mac to pay all closing costs.

• Sen. Dianne Feinstein (D-Calif.) has a bill to aid underwater homeowners by allowing them to receive Federal Housing Administration mortgage insurance.

While significant, the White House-backed legislation falls short of the extensive housing action urged by some. Liberal groups and unions want Obama to replace Edward DeMarco — acting director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac — to force the agency to approve principal mortgage reductions. Others want legislation to allow bankruptcy judges to approve principal reductions in chapter 13. Read more.

CASE AGAINST FORMER FREDDIE MAC EXECUTIVES HINGES ON DEFINITION OF "SUBPRIME"



Figuring out the definition of a "subprime mortgage" by a U.S. judge could determine whether three former Freddie Mac executives misled investors about loans backed by the mortgage giant before it sank, the Wall Street Journal reported today. Lawyers for the former executives, including Chief Executive Richard Syron, sparred at a hearing with the Securities and Exchange Commission over the definition of "subprime" and "subprime-like." The fight came as lawyers for the former Freddie Mac executives urged U.S. District Judge Richard Sullivan to throw out an eight-month-old fraud lawsuit by the SEC alleging that the former executives made "materially false and misleading public disclosures" about the company's housing-market exposure in 2007 and 2008. Lawyers for Syron, Patricia Cook, a former Freddie Mac executive vice president, and Donald Bisenius, a former senior vice president, asked the judge to dismiss the suit because Freddie Mac told investors it did not classify single-family loans using the words "prime" or "subprime." Instead, Freddie Mac provided investors with tables outlining the characteristics of loans, allowing investors to draw their own inferences about loan quality, the lawyers said. The lawyers cited an investor document that said the amount of loans that would have been subprime if the term that Freddie Mac used was "not significant." Suzanne Romajas, a lawyer for the SEC, agreed that there is no universally accepted definition of "subprime," but she said Freddie Mac used a combination of factors to decide whether a certain loan was high-risk, and the former executives should have disclosed all of the mortgages that were vulnerable to potential default. For example, including mortgages with "subprime-like" characteristics would have increased Freddie Mac's overall high-risk loan exposure to 10 percent of its portfolio, not the 0.1 percent claimed by the company, she added. Read more. (Subscription required.)

SUPREME COURT CASE COULD CURB DEBT-COLLECTION LAWSUITS



Fearing that the legal playing field could be tilted against consumers, a group of federal and private consumer agencies have filed briefs in a U.S. Supreme Court case that threatens to shift the cost of a lawsuit to consumers in debt-collection cases, CreditCards.com reported today. In the past, collectors have absorbed court costs in "good faith" suits by consumers, even if the consumer loses, unless the consumers sued in bad faith or for purposes of harassment. Without this protection from fee shifting, people would be discouraged from suing debt collectors, say the Federal Trade Commission, the Consumer Financial Protection Board and a group of private consumer advocacy groups in legal briefs filed this month. There has been a surge in the number of cases filed against debt collectors under the Fair Debt Collection Practices Act, the 1977 federal law that regulates the activities of third-party debt collectors. The case that made it to the Supreme Court, though, could discourage such suits, the agencies say. The case, known as Marx v. General Revenue Corp., revolves around the experience of Olivea Marx, a Colorado woman who racked up student debt and failed to pay it, then was contacted by a debt collector. Marx, a single mother with two young children and a low-paying job, claimed that the collector's vigor went beyond the limits of the law. The collector called her several times a day, she said, and illegally threatened to garnish half her wages and sent a collection-related fax to her employer. She sued, but the lower court disagreed, finding that the debt collector's contact with the woman's employer did not violate the law because it did not specifically mention her debt. The court ordered her to pay $4,543 in costs -- nearly all of which compensated the debt collector for hiring a court reporter and bringing in witnesses. Read more.

TRANSUNION: U.S. AUTO LOAN DELINQUENCY RATE IN SECOND QUARTER AT LOWEST LEVEL



Credit-information company TransUnion Corp. said that the national delinquency rate of auto loans in the U.S. hit its lowest level for the second consecutive quarter since the firm began tracking the data in 1999, Dow Jones Newswires reported today. Auto loan delinquency rates in the second quarter dropped to 0.33 percent, down from 0.36 percent in the first quarter and 0.44 percent in the period a year ago. In addition to increased demand in new and used autos, bank auto debt per borrower rose to $13,427 in the second quarter from $12,689 in the previous year. TransUnion said that despite growing bank auto debt, the majority of states and cities are experiencing declines in their auto loan delinquency rates. Read more.

REGIONAL AIRLINES FACE CLOSINGS, BANKRUPTCY



Regional airlines operate half the nation's scheduled flights, but several of those carriers are being closed or are in bankruptcy court protection, USA Today reported today. They face significant challenges, as the big airlines they often fly for are phasing out smaller and costlier regional jets and cutting some low-traffic regional routes to focus on those that are more lucrative. Delta, the largest operator of 50-seat aircraft among U.S. airlines, will shutter regional carrier Comair after Sept. 29. Pinnacle Airlines, with subsidiaries such as Colgan that have flown for United, US Airways and Delta, filed for bankruptcy protection in April. AMR, the parent company of American Airlines and regional carrier American Eagle, filed for bankruptcy protection in November. "Airlines are finding these smaller jets just don't make them any money," says industry analyst Mike Boyd. "That's why they're shutting down Comair. That's why Pinnacle is in bankruptcy. It's a sector of (the) industry that provides a type of aircraft that's rapidly becoming obsolete." Read more.

ORCHESTRAS FIGHT HARD TIMES THROUGH BANKRUPTCY SEEKING NEW MODEL



Orchestras across the country continue to struggle financially, and some are following the lead of the Philadelphia Orchestra, Bloomberg News reported today. The Philadelphia Orchestra was the biggest among at least five U.S. symphonies to seek court protection in the wake of the 2008 economic collapse. Others include music organizations in Louisville, Ky., Syracuse, N.Y., Albuquerque, N.M., and Honolulu. Though subject to the same harsh realities of bankruptcy as corporations, the recent reorganization in Philadelphia -- and the decreased debt and expenses the group emerged with -- may serve as a model for other symphonies struggling with fewer donors and lower ticket sales. With its turnaround plan approved, the Philadelphia Orchestra Association exited court protection on July 30 after 15 months, having resolved $100 million in claims with a $5.5 million settlement, shrinking its payroll and winning a release from its pension obligations. Read more.

Click here to listen to an ABI podcast that focuses on orchestra bankruptcies.

DON'T MISS THE "WHEN IS AN INDIVIDUAL CHAPTER 11 THE BEST FIT?" WEBINAR ON SEPT. 27!



Chapter 11 can offer significant relief for certain individuals who need a restructuring of their finances. Learn when and how to use this tool in a 75-minute live webinar on Sept. 27 at noon ET. An expert panel will guide you through a successful individual chapter 11 and discuss key issues such as plan confirmation, modification and treatment of future income and secured debt.

Panelists on the webinar include:

• James F. Molleur of the Molleur Law Office (Biddeford, Maine)

• John P. Fitzgerald, III, of the Office of the U.S. Trustee (Boston)

• Raymond J. Obuchowski of Obuchowski & Emens-Butler, PC (Bethel, Vt.)

• Jennifer Rood of Bernstein Shur (Manchester, N.H.)

This panel was the highest rated at ABI's Northeast Bankruptcy Conference in July. The webinar is available to ABI members for $75. To register, please click here.

ABI IN-DEPTH

ABI MEMBERS WELCOME TO ATTEND ACB'S FREE HALF-DAY "BANKRUPTCY: BACK TO THE FUTURE" PROGRAM IN SEPTEMBER



The American College of Bankruptcy invites you to attend a free half-day program on Sept. 28 in Chicago for a discussion of many of the challenging topics facing current bankruptcy and reorganization professionals. Topics to be addressed include recent decisions of the U.S. Supreme Court and Court of Appeals, important work of the Advisory Committee on Bankruptcy Rules, and developments in the field of bankruptcy ethics. The nation’s leading judges, academics and bankruptcy professionals are among the speakers for the program. While there is no cost to attend, seating is limited, so early reservation is suggested. For more information and to register, please click here.

LATEST CASE SUMMARY ON VOLO: NUVEEN MUNICIPAL TRUST V. WITHUMSMITH BROWN, P.C. (3D CIR.)



Summarized by Matthew Heimann of Porzio, Bromberg & Newman, PC

Affirming the district court, the Third Circuit held that the district court did have "related to" jurisdiction under 28 U.S.C. § 1334(b) to adjudicate Appellant's action against the debtor’s accounting firm and counsel regarding an audit report and opinion letter that was prepared for the pre-petition transaction. The Third Circuit enunciated the principles of "related to" jurisdiction and its "conceivability" inquiry that applies to such analyses.

There are more than 600 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: FURTHER EXAMINATION OF THE FIFTH CIRCUIT’S RULING IN THE PILGRIM’S PRIDE CASE



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines the Fifth Circuit's ruling in the Pilgrim's Pride case. The court ruled in the case that a $1 million “enhancement fee" is OK after the company's reorganization plan paid a 100 percent dividend to unsecured creditors.

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 Twombly/Iqbal rule for pleading ‘plausible’ claims has been applied too stringently in dismissing avoidance actions for failure to state a claim.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?



Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

September

- 7th Annual Golf and Tennis Outing

     September 11, 2012 | Maplewood, N.J.

- Complex Financial Restructuring Program

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

- Southwest Bankruptcy Conference

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

- 38th Annual Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization

     September 19-20, 2012 | New York, N.Y.

- "When Is an Individual Chapter 11 the Best Fit?" Live Webinar

     September 27, 2012

- American College of Bankruptcy's "Bankruptcy: Back to the Future" Program

     September 28, 2012 | Chicago, Ill.

October

- Nuts & Bolts for Young and New Practitioners - KC

     October 4, 2012 | Kansas City, Mo.

- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum

     October 5, 2012 | Kansas City, Mo.

- Bankruptcy 2012: Views from the Bench

     October 5, 2012 | Washington, D.C.

- Chicago Consumer Bankruptcy Conference

     October 8, 2012 | Chicago, Ill.

- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar

     October 15, 2012

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

November

- U.S./Mexico Restructuring Symposium

     November 7, 2012 | Mexico City, Mexico

- Professional Development Program

     November 9, 2012 | New York, N.Y.

- Detroit Consumer Bankruptcy Conference

     November 12, 2012 | Detroit, Mich.

- Winter Leadership Conference

     November 29 - December 1, 2012 | Tucson, Ariz.