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Rue21 to Sell Itself to Apax for 1.1 Billion

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Rue21 said yesterday that it would sell itself to Apax Partners for about $1.1 billion, including debt, as private-equity firms continue their pursuit of purveyors of fashion, the New York Times DealBook blog reported yesterday. Under the terms of the deal, Apax will pay $42 a share, 23 percent above the closing share price on Wednesday. In an unusual twist, one of rue21’s biggest shareholders is a buyout fund named SKM II, the last remnant of Saunders Karp & Megrue, which merged in 2005 with Apax. Under the terms of the transaction, a majority of shareholders apart from SKM, which owns a 30 percent stake, must vote to approve the Apax takeover.

CFTC Watchdog Faults Gensler for Recusal from MF Global Probe

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The chairman of the U.S. derivatives regulator made a questionable call when he chose to distance himself from probing the demise of futures broker MF Global, the agency's internal watchdog said in a report released on Tuesday, Reuters reported yesterday. The findings by the inspector general of the Commodity Futures Trading Commission, Roy Lavik, were part of a broader report into whether the agency made any missteps into how it regulated MF Global. The report questioned whether it was proper for CFTC chairman Gary Gensler to recuse himself from handling MF Global, which collapsed in 2011, after he played a prominent role leading up to its bankruptcy. MF Global quickly sought Chapter 11 protection on October 31, 2011, after experiencing several frantic days of shuffling around money and seeking a buyer as bets the firm had made on European sovereign debt went sour. Gensler decided to distance himself from the brokerage only after its collapse, and after Republican Senator Charles Grassley (R-Iowa) publicly raised concerns over his prior business relationship with MF Global Chief Executive Jon Corzine. The two had worked at Goldman Sachs at the same time, but the mere fact that they knew each other was no reason for Gensler to recuse himself, the report said.

House Committee to Examine Issues Surrounding Federal Prosecution of Large Financial Institutions

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House Financial Services Subcommittee on Oversight and Investigations will hold a hearing today at 2 p.m. ET titled “Who Is Too Big to Fail: Are Large Financial Institutions Immune from Federal Prosecution?” The witness at the hearing will be Mythili Raman, Acting Assistant Attorney General, Criminal Division, U.S. Department of Justice. For more information on the hearing, pleas click here: http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=33…

SAC Capital Aims to Stem Withdrawal Requests

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The embattled hedge fund SAC Capital Advisors is bracing itself for another round of withdrawal requests from investors after disclosing that it would no longer fully cooperate with the government’s scrutiny of its trading practices, the New York Times DealBook blog reported today. SAC’s investors have two weeks to decide whether to withdraw money from the $15 billion hedge fund, which is owned by Steven A. Cohen. Earlier this year, SAC investors asked to redeem $1.7 billion, and the firm is scrambling to stanch the outflow of more funds as fears rise that the insider trading investigations could further damage Cohen and his firm.

Report Average Credit Card Debt Late Payments Fall in First Quarter

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ABI Bankruptcy Brief | May 21 2013


 


  

May 21, 2013

 

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  NEWS AND ANALYSIS   

REPORT: AVERAGE CREDIT CARD DEBT, LATE PAYMENTS FALL IN FIRST QUARTER



Credit reporting agency TransUnion said that the rate of credit card payments at least 90 days overdue fell to 0.69 percent in the first quarter from 0.85 percent a year earlier — a drop of nearly 19 percent, the Associated Press reported today. The January-March card delinquency rate was also down from 0.73 in the October-December quarter, when many consumers ramped up credit use to finance holiday season purchases. Average credit card debt per borrower fell 1.7 percent to $4,878 in the first quarter from $4,962 in the same period last year, TransUnion said. On a quarterly basis, it declined 4.8 percent from $5,122 in the fourth quarter. TransUnion, however, has forecast that average credit card debt will rise by roughly 8 percent to $5,446 by the end of this year — the highest level in four years. Read more.

EDITORIAL: DERIVATIVES REFORM ON THE ROPES



New rules to regulate derivatives, adopted last week by the Commodity Futures Trading Commission, are a victory for Wall Street and a setback for financial reform, according to a New York Times editorial yesterday. The regulations, required under the Dodd-Frank reform law, are intended to impose transparency and competition on the notoriously opaque multitrillion-dollar market for derivatives, which is dominated by five banks: JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup and Morgan Stanley. In the run-up to the financial crisis — and since — the lack of transparency and competition has fostered recklessness and instability, according to the editorial. Under the Dodd-Frank law, derivatives are supposed to be traded on “swap execution facilities,” which are to operate much like the exchanges that exist for equities and futures. Even as the new rules shift much of the trading to those facilities, the editorial says that they will also preserve the ability of the banks to maintain their old practices. For instance, the commission’s initial proposal called for hedge funds, asset managers and corporations to contact at least five banks when seeking prices for a derivatives contract. In a major concession to the banks, that number was lowered to two in the final rule. Read the full editorial.

REGULATORS TO VOTE ON OVERSIGHT OF NONBANK FINANCIAL INSTITUTIONS



Treasury Secretary Jacob Lew told the Senate Banking Committee that U.S. regulators will soon vote on which large nonbank financial firms will face much stricter government oversight as policymakers seek to reduce risks posed by Wall Street to the broader economy, the Wall Street Journal reported today. Lew appeared before the Senate Banking Committee to discuss the work of federal regulators to implement the 2010 Dodd-Frank financial-overhaul law and limit potential risks to the financial system. The Financial Stability Oversight Council, comprised of Treasury officials and other regulators, have struggled in deciding which large, complex financial firms should be subject to higher capital and other rules because of the potential risks they pose to the financial system. "The Council discussed its ongoing analysis at its most recent meeting on April 25, and it expects to vote on proposed designations of an initial set of nonbank financial companies in the near term," Lew said. While federal officials have declined to say publicly which firms are being considered for a "systemic" designation, at least three companies have reached the final of three stages in the review process. Prudential Financial Inc., American International Group Inc. and the GE Capital unit of General Electric Co. have advanced to the third stage, though regulators are considering a number of firms that could ultimately be subject to the enhanced oversight. "Yields and volatility in fixed-income markets are very low by historical standards, which may be providing incentives for market participants to 'reach for yield' by investing in lower-grade credit," Lew said in prepared remarks. Read more. (Subscription required.)

Click here to read Lew's prepared testimony for today's Senate Banking Committee hearing.

ANALYSIS: WIELDING HARRISBURG EXAMPLE, SEC AIMS FOR CITIES TO COMPLY WITH DISCLOSURE RULES



The Securities and Exchange Commission's rebuke of the city of Harrisburg this month over fraudulent statements and long-overdue disclosures to its bondholders could be seen as a warning to state and local politicians who offer too rosy a view of their financial health, according to a Reuters analysis yesterday. However, clear-cut cases of officials misstating their city's finances, such as Harrisburg, remain relatively rare, and the main goal of the U.S. Securities and Exchange Commission is far more basic: cajoling thousands of cities, counties and other organizations that sell bonds into complying with its disclosure rules. When the SEC charged the cash-strapped capital city of Pennsylvania on May 6, it effectively put officials across the country on notice that even political statements such as annual state-of-the-city addresses must not overstate financial conditions. The message was, "What you say can and will be used against you," said Ben Watkins, head of Florida's Division of Bond Finance. "What makes it precedent-setting is that it's the first time there's been an enforcement action on statements made by public officials." The SEC said Harrisburg had defrauded its creditors because numerous officials glossed over its disastrous finances and the city was overdue in its disclosures. While no individuals were held to account, an SEC commissioner said that it would not show such restraint in the future. Read more.

ABI LIVE WEBINAR NEXT WEEK WILL FOCUS ON CLASS ACTIONS IN BOTH BUSINESS AND CONSUMER CASES



Class action lawsuits in both chapter 11 and 13 cases are becoming more prevalent. Are you wondering whether your clients’ WARN Act claims would be better pursued against a debtor company in a class action adversary proceeding or in a class proof of claim, or both? If your client has been sued in a debtor’s consumer class action adversary proceeding, do you know the best defenses against class certification? ABI's panel of experts will highlight the case law and explore the potential benefits and pitfalls of class actions by creditors against debtor companies in chapter 11 cases and by debtors/trustees against creditors in chapter 13 cases on May 29 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.

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!

ABI GOLF TOUR UNDERWAY; NEXT STOP IS CENTRAL STATES BANKRUPTCY WORKSHOP IN JUNE



Rob Schwartz and Scott Gautier are tied at 34 Stableford Points atop the closely bunched leaderboard after the ABI's Golf Tour's first stop at Lake Presidential Golf Club. Next up for the Tour is the famed Bear course at the Grand Traverse Resort at the Central States Bankruptcy Workshop on June 14. 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! There's no charge to register or participate in the Tour, and women are most welcome.

ABI MEMBERS WELCOME TO ATTEND INSOL'S LATIN AMERICAN REGIONAL SEMINAR ON JUNE 13 IN SAO PAULO



ABI members are encouraged to attend INSOL’s Latin American regional seminar in São Paulo, Brazil, on June 13. The one-day seminar has been organized by INSOL in association with TMA Brasil to cover current cross-border insolvency and restructuring topics. The seminar is designed to be interactive and to allow the attendees to discuss and debate about practical issues with speakers who are leading players in the insolvency and restructuring field and with experience in insolvency proceedings involving different countries. The seminar will benefit from simultaneous translation in English, Portuguese and Spanish. For more information and to register, please click here.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: BANK OF CORDELL V. STURGEON (IN RE STURGEON; 10TH CIR.)



Summarized by Steven T. Mulligan of Bieging Shapiro & Barber LLP

The Tenth Circuit BAP found that the evidence supported the bankruptcy court’s finding that the debtor was an active, knowing participant in a fraudulent scheme to deceive the appellee through a series of false representations and false pretenses that created a contrived and misleading understanding by the appellee, and that the debtor thereby intended to deceive the appellee.

There are more than 800 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: WILL TRADITIONAL CHAPTER 11 INVESTORS FIND A ROLE IN CHAPTER 9?

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. While most chapter 11 cases have “rules of engagement” that are well-known by the sophisticated players who are guided by the Bankruptcy Code and an extensive body of case law, chapter 9 lacks much of this clarity, making it a scarier place for traditional funds to invest, according to a recent blog post.

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

Bankruptcy courts should implement constructive trusts in any case where applicable state law would recognize them.

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 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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NEXT WEEK:

 

 

CCA Webinar 2013

May 29, 2013

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COMING UP

 

 

 

Memphis 2013

June 7, 2013

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CSBW 2013

June 13-16, 2013

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Golf Tournament 2013

June 14, 2013

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INSOL’s Latin American Regional Seminar in São Paulo, Brazil

June 13, 2013

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NE 2013

July 11-14, 2013

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SEBW 2013

July 18-21, 2013

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MA 2013

Aug. 8-10, 2013

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SW 2013

Aug. 22-24, 2013

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NYIC Golf Tournament 2013

Sept. 10, 2013

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Endowment Baseball 2013

Sept. 12, 2013

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Endowment Football 2013

Oct. 6, 2013

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40-Hour Mediation Program

Dec. 8-12, 2013

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  CALENDAR OF EVENTS
 

2013

May

- ABI Live Webinar: Consumer Class Actions

     May 29, 2013

June

- Memphis Consumer Bankruptcy Conference

     June 7, 2013 | Memphis, Tenn.

- Central States Bankruptcy Workshop

     June 13-16, 2013 | Grand Traverse, Mich.

- INSOL’s Latin American Regional Seminar

     June 13, 2013 | São Paulo, Brazil

- Charity Golf Tournament

     June 14, 2013 | City of Industry, Calif.

July

- Northeast Bankruptcy Conference and Northeast Consumer Forum

     July 11-14, 2013 | Newport, R.I.

- Southeast Bankruptcy Workshop

     July 18-21, 2013 | Amelia Island, Fla.


  

August

- Mid-Atlantic Bankruptcy Workshop

    August 8-10, 2013 | Hershey, Pa.

- Southwest Bankruptcy Conference

    August 22-24, 2013 | Incline Village, Nev.

September

- ABI Endowment Golf & Tennis Outing

    Sept. 10, 2013 | Maplewood, N.J.

- ABI Endowment Baseball Game

    Sept. 12, 2013 | Baltimore, Md.

October

- ABI Endowment Football Game

    Oct. 6, 2013 | Miami, Fla.

December

- ABI/St. John’s Bankruptcy Mediation Training

    Dec. 8-12, 2013 | New York


 
 

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Criminal Charges Weighed Against SAC

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U.S. prosecutors are considering possible criminal charges against SAC Capital Advisors LP as a result of the government's insider-trading investigation of the hedge-fund firm, the Wall Street Journal reported today. The move came before the company told clients on Friday that it will no longer provide "unconditional" cooperation with the multiyear probe of SAC and billionaire founder Steven A. Cohen. The firm did not tell clients the reason for the reversal. It is not clear what led prosecutors to warn the Stamford, Conn.-based hedge-fund operator that it could be charged criminally. But the move is the strongest sign yet that prosecutors and the Federal Bureau of Investigation are trying to ratchet up the pressure as a five-year deadline looms to file the most serious charges related to trading that allegedly involved Cohen. Recent developments include subpoenas issued to Cohen and other SAC employees to provide grand-jury testimony.

Wall Street Wins Rollback in Dodd-Frank Swap-Trade Rules

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JPMorgan Chase & Co., Goldman Sachs Group Inc. and the world’s largest banks won rollbacks in final Dodd-Frank Act rules that promise to transform the private swaps market by increasing competition, Bloomberg News reported yesterday. The Commodity Futures Trading Commission voted 4-1 yesterday on rules determining how buyers and sellers must trade credit-default, interest-rate and commodity swaps in a $633 trillion global market. The rule weakened a proposal by reducing the number of price quotes buyers must seek on swap-execution facilities after banks and asset managers said a five-quote requirement was onerous and would impair trading.

Big Banks Get Break in Rules to Limit Risks

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Under pressure from Wall Street lobbyists, federal regulators have agreed to soften a rule intended to rein in the banking industry’s domination of the derivatives market, the New York Times DealBook blog reported yesterday. The changes to the rule to be announced today could effectively empower a few big banks to continue controlling the derivatives market, a main culprit in the financial crisis. The $700 trillion market for derivatives has operated in the shadows of Wall Street rather than in the light of public exchanges. Just five banks hold more than 90 percent of all derivatives contracts. Yet allowing such a large and important market to operate as a private club came under fire in 2008. Derivatives contracts pushed the insurance giant American International Group to the brink of collapse before it was rescued by the government. In the aftermath of the crisis, regulators initially planned to force asset managers like Vanguard and Pimco to contact at least five banks when seeking a price for a derivatives contract, a requirement intended to bolster competition among the banks. Now, according to officials briefed on the matter, the Commodity Futures Trading Commission has agreed to lower the standard to two banks. About 15 months from now, the officials said, the standard will automatically rise to three banks. And under the trading commission’s new rule, wide swaths of derivatives trading must shift from privately negotiated deals to regulated trading platforms that resemble exchanges.

Goldman Sachs Wins Dismissal of Abacus CDO Suit on Appeal

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Goldman Sachs Group Inc. won dismissal of bond insurer ACA Financial Guaranty Corp.’s fraud lawsuit over a collateralized debt obligation known as Abacus, Bloomberg News reported yesterday. A New York state appeals court in Manhattan yesterday ordered the complaint against Goldman Sachs dismissed, overturning a lower-court ruling that had allowed the case to proceed. ACA claimed that New York-based Goldman Sachs and hedge-fund firm Paulson & Co. conspired to induce ACA to provide financial guaranty insurance for the Abacus transaction and deceived the insurer into believing Paulson was a long investor when in fact it was taking a short position. The appeals court said that ACA could have uncovered Paulson’s actual position, “but apparently chose not to.”

CFTC Said to Review Wall Street Banks for Off-Exchange Trades

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The top U.S. derivatives regulator is seeking documents from Wall Street banks about trades that combine features of swaps and futures since the Dodd-Frank Act became law, Bloomberg News reported yesterday. The Commodity Futures Trading Commission (CFTC) made the request in a special call for data on energy and metals trades since July 2010, when President Barack Obama enacted the rules overhaul including new derivatives measures. The information sought by the agency is about contracts known as exchange of futures for swaps, or EFS, which CME Group (CME) Inc., owner of the world’s largest futures exchange, has provided for more than a decade. The trades are conducted off exchange by brokers and then guaranteed at clearinghouses.