Municipal Bankruptcy

ANALYSIS: AN IN-DEPTH LOOK AT HOW DETROIT WENT BROKE

Detroit's financial history back to the 1950s shows that its elected officials and others charged with managing its finances repeatedly failed -- or refused -- to make the tough economic and political decisions that might have saved the city from financial ruin, according to a Detroit Free Press analysis on Sunday. Faced with a huge exodus of residents, plummeting tax revenues and skyrocketing rates of home abandonment, Detroit's leaders engaged in a billion-dollar borrowing binge, created new taxes and failed to cut expenses when they needed to. Simultaneously, they gifted workers and retirees with generous bonuses. And under pressure from unions and, sometimes, arbitrators, they failed to cut health care benefits -- saddling the city with staggering costs. The State of Michigan also bears some of the blame, as Lansing politicians reduced Detroit's state-shared revenue by 48 percent from 1998 to 2012, withholding $172 million from the city, according to state records. Decades of mismanagement added to Detroit's fiscal woes. The city notoriously bungled multiple federal aid programs and outrageously overpaid to incentivize projects such as the Chrysler Jefferson North plant. Read more.

SINCE LEHMAN'S COLLAPSE, COMPANIES MORE FORTHCOMING ON COMPLIANCE

One major change since the financial crisis is how companies have become more transparent about pending litigation and government investigations, the New York Times DealBook blog reported yesterday. And in response to greater public scrutiny, that has meant committing a lot more money and resources to comply with a host of regulatory requirements. The collapse of Lehman Brothers had little to do with how well, or poorly, the firm followed the rules. Public outrage, however, over the government's failure to oversee financial institutions has created a much tougher regulatory environment in which companies cannot afford to fall short. The Dodd-Frank Act was adopted in 2010 to address inadequate oversight and regulation of the financial markets. But many of the rules mandated by the law have yet to be adopted, as the Securities and Exchange Commission and the Commodity Futures Trading Commission are bogged down with figuring out exactly how to regulate financial products like derivatives and money market funds. Companies, surprisingly though, have not waited around to be prodded. Read more.

ABI held a media teleconference on Sept. 12 that discussed the Lehman chapter 11 filing, the lessons learned from it five years later and what the future holds for distressed large financial institutions. An audio archive of the teleconference is available here.

COMMENTARY: REGULATORS SHOULD DRAW A LINE BETWEEN FINANCE AND COMMERCE

The Federal Reserve, Congress and some of the world's largest financial institutions are about to tackle the existential issue of what a bank is, according to a commentary in today's Wall Street Journal. The narrow version of the debate, according to the commentary, is whether JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley should continue to own, store and transport commodities such as oil, copper and electricity. But its ramifications reach into a cornerstone of modern U.S. financial architecture: the separation of finance and commerce. Decisions made in the coming weeks should determine the boundaries of what banks can and can't do, as well as affect other participants in the economy ranging from brewers to Coke drinkers. Read more. (Subscription required.)

ANALYSIS: A TOXIC SUBPRIME MORTGAGE BOND'S LEGACY LIVES ON

Composed entirely of loans made by Countrywide Financial Corp., subprime mortgage bond "CWABS 2006-7" was so battered by delinquencies in 2009 that it appeared that nearly all of the thousands of mortgages held by the bond could default, according to an analysis in Friday's Wall Street Journal. Subprime bond CWABS 2006-7 began as a bundle of nearly 6,000 mortgages in 2006, but by 2013, fewer than a third remained. One might think that today, such a relic of misbegotten lending would be as dead as orbiting space junk. Instead, CWABS 2006-7 is alive and well, a sought-after asset that has made big profits for savvy investors. A senior slice of it now trades at 91 cents on the dollar, having come nearly all the way back. That has been a boon for firms such as bond giant Pimco, whose stake in the Countrywide bond has helped make one of Pimco's funds a top performer in its category. At the same time, the bond has affected the lives of struggling Florida homeowners; some are unable to make their payments, and others determinedly continue to do so at above-market mortgage rates. Read more. (Subscription required.)

ABILIVE WEBINAR ON SEPT. 24 TO EXAMINE THE COMPLEX REQUIREMENTS AND ETHICAL DUTIES OF REPRESENTING CONSUMER DEBTORS

The abiLIVE webinar on Sept. 24 will feature a panel of experts discussing the ethical and compensation issues that can arise while representing chapter 7 and 13 debtors as well as individual chapter 11 debtors. Topics covered include client fraud and an attorney's duty to verify client information, attorney fee structures, and complex issues in individual chapter 11 cases. The panel includes perspectives from the attorneys and trustees, as well as the academic reporter for the ABI Ethics Task Force. Click here to register.

NEW ABILIVE WEBINAR OCT. 3: THE INTERSECTION OF INTELLECTUAL PROPERTY AND BANKRUPTCY: KODAK, NORTEL AND OTHER CASES

IP experts will shed light on the mysteries of understanding IP law and navigating the often puzzling sales processes, drawing from their experiences in Nortel, Kodak and other important cases, in an abiLIVE webinar on Oct. 3 from 1:00-2:15 p.m. ET. Speakers will include David Berten (Global IP Law Group, LLC; Chicago), Pauline K. Morgan (Young Conaway Stargatt & Taylor, LLP; Wilmington, Del.), Cassandra M. Porter (Lowenstein Sandler LLP; Roseland, N.J.), Kelly Beaudin Stapleton (Alvarez & Marsal; New York) and Christopher Burton Wick (Hahn Loeser & Parks LLP; Cleveland). To register, click here.

RECORDING AVAILABLE OF THE ABILIVE WEBINAR EXAMINING THE NEW U.S. TRUSTEE FEE GUIDELINES!

If you were not able to join ABI's recent well-attended abiLIVE webinar examining the U.S. Trustee Fee Guidelines for chapter 11 cases filed on or after Nov. 1, a recording of the program is now available for downloading! A panel of experts, including Clifford J. White, the director of the U.S. Trustee Program, discussed 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. The 90-minute recording is available for the special ABI member price of $75 and can be purchased here.

ABI GOLF TOUR UNDERWAY; LAST STOP FOR 2013 IS WINTER LEADERSHIP CONFERENCE IN DECEMBER

The 7th and final stop for the 2013 ABI Golf Tour is on Dec. 5 at the Trump National Golf Club, held in conjunction with ABI’s Winter Leadership Conference. Final scoring to win the Great American Cup — sponsored by Great American Group — is based on your top three scores from the seven ABI events. 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 at July’s Southeast Bankruptcy Workshop. There's no charge to register or participate in the Tour.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: MORRIS AVIATION LLC V. DIAMOND AIRCRAFT INDUSTRIES INC. (6TH CIR.)

Summarized by Mike Debbeler of Graydon Head & Ritchey LLP

The Sixth Circuit ruled that the airplane manufacturer's opinion of the "quality and reliability" of components was not a fraudulent or negligent misrepresentation where the component manufacturer filed bankruptcy and voided warranties on components shortly after plaintiff purchased the airplane from the manufacturer. The airplane manufacturer's mere opinion as to component manufacturer's financial health did not form the basis of a misrepresentation claim.

There are more than 1,000 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 ANALYSIS OF JPMORGAN'S SETTLEMENT OVER "LONDON WHALE" LOSSES

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post explores JPMorgan Chase's $750 million to $800 million settlement with U.S. and U.K. regulators related to last year's $6 billion "London Whale" trading loss.

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

Success fees for financial advisors should be prohibited.

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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2013

September

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

    Sept. 18-19, 2013 | New York

- abiLIVE Webinar: Complex Requirements and Ethical Duties of Representing Consumer Debtors

     Sept. 24, 2013

- Bankruptcy 2013: Views from the Bench

    Sept. 27, 2013 | Washington, D.C.

October

- abiLIVE Webinar: The Intersection of Intellectual Property and Bankruptcy: Kodak, Nortel and Other Cases

     Oct. 3, 2013

- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum

    Oct. 4, 2013 | Kansas City, Mo.

- Professional Development Program

    Oct. 11, 2013 | New York, N.Y.

- Chicago Consumer Bankruptcy Conference

    Oct. 14, 2013 | Chicago, Ill.

- International Insolvency & Restructuring Symposium

    Oct. 25, 2013 | Berlin, Germany

November

- Complex Financial Restructuring Program

   Nov. 7, 2013 | Philadelphia, Pa.

- Corporate Restructuring Competition

   Nov. 7-8, 2013 | Philadelphia, Pa.

- Austin Advanced Consumer Bankruptcy Practice Institute

   Nov. 10-12, 2013 | Austin, Texas

- Detroit Consumer Bankruptcy Conference

   Nov. 11, 2013 | Detroit, Mich.

- Delaware Views from the Bench

   Nov. 25, 2013 | Wilmington, Del.

December

- Winter Leadership Conference

    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.

- ABI/St. John’s Bankruptcy Mediation Training

    Dec. 8-12, 2013 | New York

FEDS FIND RACIAL HOSTILITY, DISCRIMINATION TO BE RAMPANT INSIDE CFPB

America's newest federal agency, charged with regulating financial institutions to prevent another hostile economic downturn, is reportedly having trouble regulating hostilities and discrimination among its own employees, the Washington Times reported yesterday. Evidence gathered by congressional investigators, internal agency documents and Washington Times interviews with workers discloses scores of cases of U.S. Consumer Financial Protection Bureau employees seeking protection from racially offensive, sexist or discriminatory behavior, including: (1) a naturalized U.S. citizen with more than a decade of service with the U.S. government was called an "f'ing foreigner" by management; (2) a department was internally dubbed "the Plantation" because of the number of African Americans working in it — all supervised by white managers — without any obvious promotional track or way to get transferred; (3) white employees were twice as likely as minorities to get the most favorable personnel ratings in employee reviews; and (4) managers intimidated and retaliated against employees for voicing complaints or offering an alternative point of view — from denying vacation requests to hiring unqualified friends to supervise jobs and then asking subordinates to train them. The CFPB acknowledges its employees' complaints about a hostile working environment and says it is working with the National Treasury Employees Union — which represents CFPB employees — to settle worker protests and iron out new performance reviews, which are at the heart of many of the protests. However, current CFBP employees say that more work needs to be done. Click here to read the full article.

SEC TIGHTENS RULES ON CREDIT RATING AGENCIES, ASSET-BACKED SECURITIES

The Securities and Exchange Commission yesterday approved final rules cracking down on credit rating agencies and asset-backed securities — two areas that SEC Chairwoman Mary Jo White said were "at the center of the financial crisis," according to an article in yesterday's ThinkAdvisor. In her opening remarks at the SEC open meeting at the agency's Washington headquarters, White said that the final rules in the "two closely related areas" give investors "powerful new tools" for independently evaluating the quality of asset-backed securities and credit ratings. "ABS issuers and rating agencies will be held accountable under significant new rules governing their activities," said White, adding that the issuance of "flawed credit ratings by certain credit rating agencies was a key contributor to the financial crisis." Since 2011, SEC staffers have annually examined each of the nationally recognized statistical rating organizations (NRSROs) registered with the SEC, as required by the Dodd-Frank Act. "While the reports from these reviews have catalogued a number of improvements, they have also identified concerns that persist, including ones related to the management of conflicts of interest, internal supervisory controls, and post-employment activities of former staff of NRSROs," White said. Click here to read the full article.

EXECUTIVES TO BE HELD MORE RESPONSIBLE FOR GOING-CONCERN DISCLOSURES

Corporate managers will have to make more uniform disclosures when there is substantial doubt about their business's ability to survive, the Financial Accounting Standards Board said yesterday, according to a Wall Street Journal blog yesterday. The FASB updated U.S. accounting rules, effective by the end of 2016, to define management's responsibility for evaluating whether their business will be able to continue operating as a "going concern" and to make relevant disclosures in financial statement footnotes. Previously, there were no specific rules under U.S. Generally Accepted Accounting Principles, and disclosures were largely up to auditors. Investors, however, have grown frustrated with the lack of going-concern opinions during the financial crisis; such missing opinions, they believe, failed to warn them of impending bankruptcies. The FASB first issued a proposal at the peak of the financial crisis in 2008, but debate and revisions delayed the final standard, which didn't go up for a vote until May. Supporters of the changes have argued that corporate managers have better information about a company's ability to continue financing their operations than auditors do. Click here to read the full article.

ANALYSIS: MORTGAGE CRISIS IS ABOUT TO FLARE UP AGAIN

We are nearly eight years removed from the beginnings of the foreclosure crisis, and since it began, more than five million homes have been lost. So it would be natural to believe that the crisis has receded. Statistics point in that direction. Financial analyst CoreLogic reports that the national foreclosure rate fell to 1.7 percent in June, down from 2.5 percent a year ago. But these numbers are likely to reverse next year, with foreclosures spiking again, according to an analysis in the New Republic Sunday. A series of temporary relief measures and legacy issues from the crisis will begin to bite in 2015, causing home repossessions that could present economic headwinds. In other words, the foreclosure crisis was never solved; it was deferred. The problem comes from many different angles. Home equity lines of credit will start to feature increased payments, as borrowers must pay back principal instead of just the interest. In addition, the relief offered by the government's Home Affordable Modification Program (HAMP), which provided temporary interest rate easing to borrowers, will start running out, and interest rates will start rising about 1 percent each year. Analysts also believe that the foreclosure backlog, mostly in states that require a court ruling to foreclose, will finally unclog in the coming years, which might already be happening. Despite the mostly rosy statistics, foreclosure activity did rise 2 percent from June to July after months of reductions, a potentially troubling omen of things to come. Click here to read the full analysis.

POOR CITIES CAN GET HIGH CREDIT RATINGS

Detroit's bankruptcy case cast a cloud of doubt over other U.S. cities with large populations of poor residents, but a surprising number of them are in relatively good financial shape, the Wall Street Journal reported yesterday. In a new report, Moody's Investors Service found that 27 of the 50 poorest large cities are rated relatively high in their ability to pay back debts and manage their long-term needs. "Poverty is something that we get asked about a lot," said Moody's Thomas Compton, an analyst and co-author of the report. "What we found is that contrary to what a lot of people may think, just because there is a high poverty rate it doesn't mean that you're going to have low credit quality." Poverty can lead to paltry tax revenues and an increased need for municipal services, making debt repayment a challenge. But the cities with high poverty rates and relatively high credit ratings — Provo, Utah, and Dayton, Ohio, among them — have achieved some combination of a large and diverse tax base, strong finances, stable government and controlled costs, according to Moody's. Cities with a lot of poor people also may have a lot of rich people, and other entities may chip in to pay for the kind of costly social services associated with the poor. But although many cities manage high poverty rates effectively, Moody's noted that poverty does remain a challenge to local governments. Click here to read the full article (subscription required).

COMMENTARY: HOW WOULD THE FED RAISE RATES?

While central bankers at the Jackson Hole symposium on Friday heard a lot of talk from Federal Reserve Chair Janet Yellen about the labor market, over which central bankers have proved to have only limited influence, they heard very little about global asset inflation, over which they could have a lot of influence. Yet the Fed does not appear to be inclined to exercise such influence, according to a Wall Street Journal commentary Tuesday. Yellen said that the time is not yet right to raise short-term interest rates, which would end six years of a near-zero policy and restore something more closely resembling financial normality. Given the risks of a resulting stock market crash or political uproar, it may not happen even next year unless some crisis, internal or external to the Fed, forces Yellen's hand. Meanwhile, savers and investors will continue to be denied a proper return on their investments and multibillion-dollar pension funds will flirt with insolvency, according to the commentary. A question mostly unasked at Jackson Hole is a crucial part of today's when-will-it-happen guessing game: Exactly how will the Fed go about draining liquidity if a burst of inflation urgently presented that necessity?

Click here to read the full commentary (subscription required).

WHY PACER REMOVED ACCESS TO CASE ARCHIVES OF FIVE COURTS

PACER is most often the first stop for downloading public court records, which has led some freedom-of-information advocates to criticize the electronic service — and try to create some public archives outside of it. However, on Aug. 10, the database announced the removal of access to certain case files — and not just a handful, but entire categories of documents coming from five courts, according to a Washington Post blog Tuesday. The move affects archived files in Second, Seventh, Eleventh and Federal Circuit Courts of Appeals, as well as the U.S. Bankruptcy Court for the Central District of California. Charles Hall, a spokesperson for the Administrative Office of the U.S. Courts, said that the change was made in preparation for an overhaul of the PACER architecture, including the implementation of the next generation of the Judiciary's Case Management and Electronic Case Files System. However, as a result of the changes, the locally developed legacy case-management systems of some courts are no longer compatible with PACER, according to Hall, although he added that the dockets and documents no longer available through the system could still be obtained directly from the relevant court, and that "all open cases, as well as any new filings, will continue to be available on PACER." But that also means that it is much harder for the public to access historical records — and the lack of forewarning left some legal and technical experts reeling.

Click here to read the full article.

NEW TO THE LAW PROFESSION? LAW FIRM RECENTLY ADD NEW ASSOCIATES TO THE RANKS? BE SURE TO PRE-ORDER ABI'S SURVIVAL GUIDE FOR THE NEW LAWYER!

Available now for pre-order in ABI's Bookstore is the Survival Guide for the New Lawyer: What They Didn't Teach You in Law School. The Survival Guide provides real-world guidance on the everyday aspects of practicing law, with a special emphasis on bankruptcy law. Full of anecdotal examples and hard-earned advice, this Guide is perfect for the aspiring lawyer fresh out of law school, or for any firm that wants to give its associates a leg up on the competition. Click here to pre-order, and be sure to log in first to obtain the ABI member discount!

NEW CASE SUMMARY ON VOLO: MERUELO V. REORGANIZED MERUELO MADDUX PROP. INC. (IN RE MERUELO MADDUX PROP. INC.; 9TH CIR.)

Summarized by Elie Herman

The Bankruptcy Appellate Panel vacated the order of the bankruptcy court for abuse of discretion in applying the "reasonableness" standard under § 502(b)(4) to a post-petition claim for administrative expense based on an unpaid severance and unpaid bonus, rather than the "actual and necessary" standard set forth in § 503(b)(1), and the BAP remanded for application of the proper standard.

There are more than 1,400 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: HOW THE MOMENTIVE RULING HAS SHAKEN UP DEBT MARKETS

A recent post discusses Tuesday's ruling in the Momentive Performance Materials Inc. case, and how it has rattled the distressed-investing world.

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

SARE cases should not be allowed in chapter 11.

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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2014

September
- Southwest Bankruptcy Conference
    Sept. 4-6, 2014 | Las Vegas, Nev.

- abiLIVE Webinar: Understanding Make-Whole and No Call Provisions
    Sept. 9, 2014 |

- Golf & Tennis Outing
    Sept. 9, 2014 | Maplewood, N.J.

- CARE Financial Literacy Conference
    Sept. 11-13, 2014 | Dallas, Texas

- ABI Workshop: Lending to Distressed Companies
    Sept. 15, 2014 | Alexandria, Va.

- Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization
    Sept. 17-18, 2014 | New York, N.Y.

October
- abiWorkshop: Government Contracting and Bankruptcy
    Oct. 6, 2014 | Alexandria, Va.

- Midwestern Bankruptcy Institute
    Oct. 16-17, 2014 | Kansas City, Mo.

- Views from the Bench
    Oct. 24, 2014 | Washington, D.C.

- Claims-Trading Program
    Oct. 30, 2014 | New York, N.Y.


- International Insolvency & Restructuring Symposium
    Oct. 30-31, 2014 | London

November
- Complex Financial Restructuring Program
    Nov. 6, 2014 | Philadelphia

- Corporate Restructuring Competition
    Nov. 6-7, 2014 | Philadelphia

- Chicago Consumer Bankruptcy Conference
    Nov. 11, 2014 | Chicago, Ill.

- Detroit Consumer Bankruptcy Conference
    Nov. 11, 2014 | Troy, Mich.

- Mid-Level Professional Development Program
    Nov. 12, 2014 | Chicago

December
- Winter Leadership Conference
    Dec. 4-6, 2014 | Palm Springs, Calif.

- 40-Hour Mediation Training Program
   Dec. 7-11, 2014 | New York, N.Y.

CREDIT CARD BORROWERS STILL PAYING THEIR BILLS ON TIME



Customers of the largest credit card issuers predominantly continued to pay their bills on time in July, Dow Jones Newswires reported yesterday. Credit card lending in particular has been a bright spot for big banks since the recession ended because consumers have made paying their monthly bills a priority and been more hesitant to carry large balances. That has allowed lenders to boost earnings by setting aside less money to cover potential loan losses, and it more recently led some banks to loosen their loan criteria, according to the financial services unit of credit bureau TransUnion. On Tuesday, TransUnion said that the national credit card delinquency rate fell to 0.63 percent in the second quarter from 0.73 percent in the first quarter. Major credit card issuers including Discover Financial Services, Bank of America Corp. and Capital One Financial Corp. said yesterday that their portfolios continued to improve in July, with delinquency rates and net charge-offs falling for most. Read more.

WEEKLY UNEMPLOYMENT CLAIMS RISE



The number of U.S. workers filing applications for jobless benefits rose last week, though the overall trend suggests that the labor market has improved slightly since early this summer, the Wall Street Journal reported today. Initial jobless claims increased by 2,000 to a seasonally adjusted 366,000 in the week ended Aug. 11, the Labor Department said today. Claims for the week ending Aug. 4 were revised up to 364,000 from an initially reported 361,000. The four-week moving average of claims fell by 5,500 to 363,750, the lowest level since the end of March. Read more. (Subscription required.)

NO CRIMINAL CASE IS LIKELY IN LOSS AT MF GLOBAL



A criminal investigation into the collapse of the brokerage firm MF Global and the disappearance of about $1 billion in customer money is now heading into its final stage without charges expected against any top executives, the New York Times DealBook blog reported yesterday. After 10 months of stitching together evidence on the firm's demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear. The hurdles to building a criminal case were always high with MF Global, which filed for bankruptcy in October after a huge bet on European debt unnerved the market. This week James Giddens, the MF Global liquidating trustee, said he would assist plaintiffs attorneys in civil suits against Jon Corzine and other top executives. But a lack of charges in the largest Wall Street blowup since 2008 is likely to fuel frustration with the government's struggle to charge financial executives. Just a few individuals – none of them top Wall Street players – have been prosecuted for the risky acts that led to recent failures and billions of dollars in losses. Read more.

REPORT: MUNICIPAL BONDS NOT AS SAFE AS ONCE THOUGHT



The Federal Reserve Bank of New York released a report yesterday saying that municipal bonds, widely seen as one of the safest investments, actually default more often than most people realize, the New York Times reported today. The economists said that the widely held belief that municipal bonds almost never default is based on only a narrow slice of the market — the safest part, consisting of bonds that are graded by the main ratings agencies when brought to market. When the researchers looked at a much broader sample, which included unrated bonds, they found there have been about 36 times as many municipal defaults over the past 40 years as conventional wisdom suggests. For example, Moody’s Investors Service has reported that from 1970 to 2011, there were only 71 municipal bond defaults. However, the Fed report counted 2,521 defaults in that time. Read more.

Click here to read the Federal Reserve Bank of New York's report.

In related news, barely half of U.S. states allow their local governments to file for bankruptcy, but Fitch Ratings said that it will continue to factor in the probability of a chapter 9 filing for all tax-supported local debt it rates, Reuters reported yesterday. Fitch added a new section on the legal and structural framework of debt in its criteria for rating U.S. local government bonds supported by taxes, highlighting growing concerns for municipal bankruptcies and explaining its views of the ties between local and state governments. Only 24 out of 50 states currently allow local governments to file for bankruptcy, "but Fitch believes that in an extreme case..the state would make the legal provisions necessary to file," it said. For decades, bankruptcies in the $3.7 trillion municipal bond market were rare. There have been nine chapter 9 municipal bankruptcy filings so far this year, compared with 13 in all of 2011. Read more.

REGISTRATION NOW OPEN FOR THE 24TH ANNUAL WINTER LEADERSHIP CONFERENCE!



Don't miss ABI's 24th Annual Winter Leadership Conference, taking place Nov. 29 - Dec. 1 at the JW Marriott Starr Pass Resort & Spa in Tucson, Ariz. This year's conference will feature insights from some of the top insolvency and restructuring experts on issues confronting the profession in 2013, including four specialized tracks geared toward business, consumer, financial advisor and professional development. The featured keynote speaker at this year's conference will be election analyst and author Larry Sabato. ABI's Great Debates, a field hearing of ABI’s Commission to Study the Reform of Chapter 11 and 10 committee educational sessions will also be taking place at the conference. Panel sessions include:

Business Track:

• Fraudulent Conveyance Litigation from Soup to Nuts

• Pushing the Envelope

• The Role of the Hedge Fund in Corporate Restructurings: White Knight or Villain?

• Social Networking and Bankruptcy Issues

Financial Advisors Track

• Advising the Corporate Entity

• How to Create Value for the Estate from Your First Client Meeting until Entry of a Final Decree

Consumer Track

• From Infants to Toddlers: Bankruptcy Rules 3001 and 3002.1 Experience First-Year Growing Pains

• The National Mortgage Settlement: How Will It Affect Consumer Bankruptcy Cases?

Professional Development Track

• Litigation Skills: Mock Expert Examination

• “I'm Shocked—Shocked!—to Find that Unethical Conduct Is Going On in Here!”: A Tale of Ethics in Bankruptcy

The conference will also include a final night dinner featuring impressionist, comedian and singer Jeff Tracta, and the sounds of ABI's rock-n-roll band, the Indubitable Equivalents. Click here to register!

ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: U.S. V. CARVER (6TH CIR.)



Summarized by Nicholas Miller of Neal, Gerber & Eisenberg, LLP

In affirming the lower court's ruling, the Sixth Circult held that (1) convictions for concealing assets and making a false statement under oath in bankruptcy would stand because evidence showed that the defendant (Carver) knowingly failed to disclose to the bankruptcy court a valuable wine collection and knowingly and falsely stated that he had sold the collection before the petition date; (2) Carver's sentence was procedurally reasonable because the district court properly calculated the amount of damage and number of victims caused by his crimes; and (3) his sentence was substantively reasonable because the district court, in fact, gave him a below-Guidelines sentence.

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: BUSTING THE MYTH OF GLASS STEAGALL



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post argues that restoring Glass-Steagall would be a remedy that is much like the Volcker rule: simple to say, hard to do.

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.

- 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.

JUSTICE DEPARTMENT PROBE TURNS UP HEAT ON BANKS

The Justice Department is targeting banks that service a broad range of what it considers questionable financial ventures, including online payday lenders, the Wall Street Journal reported today. The Justice Department is targeting banks that service a broad range of what it considers questionable financial ventures, including online payday lending, that officials worry may harm consumers. The government has issued subpoenas to banks and other companies that handle payments for an array of financial offerings, ramping up an investigation that has been under way for several months, according to Justice Department officials. It's a shift in strategy: Rather than just targeting individual firms, the government is now going after the infrastructure that enables companies to withdraw money from people's bank accounts. The volume of online payday lending -- a term for smaller, short-term loans at high interest rates -- grew to $18.6 billion in 2012, up 10 percent from the previous year, accounting for nearly 40 percent of industrywide payday-loan volume, according to investment bank Stephens Inc. Regulators are also trying tamp down phone and online offers in which marketers try to get people to pay for services that they don't intend to deliver. These can include offerings to erase debt or offerings of work-from-home programs that don't lead to jobs, officials say. Read more. (Subscription required.)

DETROIT RATTLES MUNI MARKET

A fight over bankrupt Detroit's sewer system threatens to reshape the nation's $3.7 trillion municipal-bond market, the Wall Street Journal reported today. The battle pits Detroit Emergency Manager Kevyn Orr against the fund companies, insurers and individuals that hold more than $5 billion of Detroit water and sewer bonds, over a plan to restructure the debt. Orr wants bondholders to sign off on a plan to tear up some outstanding bonds and replace them with new ones that could have different terms. The switch could free up millions of dollars in city revenue, potentially reducing losses for other creditors in the city's more than $18 billion bankruptcy case. Some bondholders say that they don't want that deal, even though Orr says they wouldn't suffer losses on the debt switch. They say tearing up the bonds could set a dangerous precedent that may shock buyers of supposedly safe municipal debt and impair financing for other U.S. states and cities. Read more. (Subscription required.)

For the latest information and analysis about the Detroit case, be sure to visit ABI's dedicated website, http://news.abi.org/Detroit.

COMMENTARY: PENSION REFORM COULD DISRUPT INVESTMENT FUNDS

Detroit's financial woes, exacerbated by underfunded pension liabilities, have brought renewed scrutiny to public pension plans, according to a commentary yesterday on the New York Times DealBook blog. Senator Orrin Hatch (R-Utah) and others have suggested overhauling these plans to shift more responsibility to the private sector. Private insurance companies would assume responsibility for these defined benefit plans, offering annuities to beneficiaries in exchange for employer-paid premiums. Proponents argue that privatization could reduce the risk of municipal bankruptcy and federal bailouts. One downside, according to the commentary, is the possible increase in fees associated with external management of retirement savings; it creates another way for Wall Street to extract wealth from Main Street. Phasing out public pension funds could also cut off an important source of financing for venture capital and private equity. Pension funds like the California Public Employees' Retirement System, or CalPERS, and the Teachers Retirement System of Texas are among the largest and most powerful institutional investors in venture capital and private equity. Read the full commentary.

CONSUMERS FIND INVESTORS EAGER TO MAKE "PEER-TO-PEER" LOANS



There has been a growing shift among lenders with many individual investors jumping to fund unsecured, high-interest-rate loans to bring in high yields, the Wall Street Journal reported yesterday. Even some investment funds are getting into the game, snapping up entire loans before individual investors can act. Prosper Loans Marketplace Inc., and a bigger competitor, Lending Club Corp., dominate an obscure corner of the financial-services sector called "peer-to-peer" lending, in which consumers bypass banks altogether to borrow money from other individuals. It is part of a shadow-lending system that has thrived since the 2008 financial crisis caused many banks to tighten their credit standards. With more money chasing the loans, lenders such as Prosper are working hard to come up with enough borrowers to meet the demand. Each month, Prosper mails more than a million preapproved loan applications. In June, the company arranged $27.5 million in loans, a bit short of its goal. In July, it originated $30.3 million. Prosper and Lending Club together originated about $871 million in loans last year, more than double the prior year's total and up tenfold since 2008. Lending Club says it is on track to lend $2 billion this year. Read more. (Subscription required.)

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 SOUTHWEST BANKRUPTCY CONFERENCE ON AUG. 22



The 6th stop for the ABI Golf Tour is on Aug. 22 at the Incline Village Champion course, held in conjunction with ABI's Southwest Bankruptcy Conference. 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 at July's Southeast Conference. 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: WASHINGTON GROUP INTERNATIONAL INC. V. THE UNITED STATES OF AMERICA (IN RE WASHINGTON GROUP INTERNATIONAL INC., ET AL.; 9TH CIR.)



Summarized by Joel Newell of Lane & Nach P.C.

In the unpublished ruling, the Ninth Circuit BAP affirmed Bankruptcy Judge Gregg W. Zive's application of the 9th Circuit precedent as set forth in In re Cal. Dep't of Health Svcs. V. Jensen (In re Jensen), 995 F.2d 925 (9th Cir. 1993), denying debtor's motion to enjoin the subsequent litigation.

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: DEBTOR'S BANKRUPTCY APPEAL TOSSED FOR DELAY BY ELEVENTH CIRCUIT

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post looks at a case out of the Eleventh Circuit in which a pro se debtor filed for chapter 7 bankruptcy in 2009 and disclosed that he had nearly $40,000 in student loan obligations. The debtor filed an adversary complaint against the lender and sought a determination that his student loan obligations were dischargeable. The lender served a set of interrogatories on the debtor, which the debtor steadfastly refused to answer (even after being compelled to do so by the court). Ultimately, the court dismissed the debtor's case. On appeal to the district court, the debtor failed to file or serve his initial appellate brief, never requested an extension of time, and had not otherwise appeared in the case. More than five months after the debtor filed his notice of appeal, the district court sua sponte dismissed the appeal for failure to prosecute.

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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2013

August

- abiLIVE Webinar: How Will the New U.S. Trustee Fee Guidelines Impact You?

     August 20, 2013

- 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.

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

    Sept. 18-19, 2013 | New York

- abiLIVE Webinar: Complex Requirements and Ethical Duties of Representing Consumer Debtors

     Sept. 24, 2013

- Bankruptcy 2013: Views from the Bench

    Sept. 27, 2013 | Washington, D.C.

October

- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum

    Oct. 4, 2013 | Kansas City, Mo.

- Professional Development Program

    Oct. 11, 2013 | New York, N.Y.

- Chicago Consumer Bankruptcy Conference

    Oct. 14, 2013 | Chicago, Ill.

- International Insolvency & Restructuring Symposium

    Oct. 25, 2013 | Berlin, Germany

November

- Complex Financial Restructuring Program

   Nov. 7, 2013 | Philadelphia, Pa.

- Corporate Restructuring Competition

   Nov. 7-8, 2013 | Philadelphia, Pa.

- Austin Advanced Consumer Bankruptcy Practice Institute

   Nov. 10-12, 2013 | Austin, Texas

- Detroit Consumer Bankruptcy Conference

   Nov. 11, 2013 | Detroit, Mich.

December

- Winter Leadership Conference

    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.

- ABI/St. John’s Bankruptcy Mediation Training

    Dec. 8-12, 2013 | New York

U.S. FORECLOSURE FILINGS DOWN 10 PERCENT IN JULY



Market researcher RealtyTrac reported that the number of U.S. properties with foreclosure filings slipped 10 percent in July from a year earlier, the Wall Street Journal reported today. There were 191,925 U.S. properties with default notices, scheduled auctions and bank repossessions in July, a 3 percent decrease from the prior month. One in every 686 U.S. housing units had a foreclosure filing last month, RealtyTrac reported. U.S. foreclosure activity has now decreased on a year-over-year basis for 22 consecutive months, according to the report. The latest month's decline was driven primarily by a 21 percent decline in bank repossessions from a year earlier. Properties starting the foreclosure process increased on an annual basis for the third straight month in July, rising 6 percent last month. Foreclosure starts rose on a year-over-year basis in 27 states. Read more. (Subscription required.)

CONSUMERS CUT BACK ON CREDIT CARD USE IN JUNE, BUT OVERALL BORROWING CONTINUES TO RISE



Americans cut back on credit card use in June, a sign that high sustained unemployment and slow growth have made some more cautious about spending, the Associated Press reported yesterday. Still, total consumer borrowing increased as many took on loans to buy cars and attend school. Consumer borrowing rose by $6.5 billion from May to June totaling $2.58 trillion, the Federal Reserve said on Tuesday. Auto and student loans rose by $10.2 billion to $1.71 trillion in June. Credit card debt fell $3.7 billion to $865 billion. Household debt, including mortgages and home equity lines of credit, has declined for 16 straight quarters to $12.9 trillion in March, according to the Fed. That is down from $13.8 trillion in March 2008. Read more.

REPORT: WEAK CREDIT QUALITY OF U.S. CITIES IS BIGGER CONCERN THAN BANKRUPTCIES



Morgan Stanley's municipal debt strategists said on Tuesday that weaker local credit quality should be a greater concern for municipal debt investors than chapter 9 filings, Reuters reported on Wednesday. "Our updated case study analysis of recent chapter 9 filings affirms that bankruptcies may pick up somewhat, but the ongoing deterioration of local credit quality is a more relevant systemic risk," Morgan Stanley Research's Michael Zezas and Meghan Robson said in a report. The researchers said that chapter 9 filings and municipalities flirting with bankruptcy are "likely to remain modest and idiosyncratic." Even so they urged scrutinizing state and local credits, adding that they favor enterprise revenue debt over general obligation bonds. Read more.

ANALYSIS: UPPER-MIDDLE-INCOME HOUSEHOLDS SEE BIGGEST JUMPS IN STUDENT LOAN BURDEN



According to a Wall Street Journal analysis of recently released Federal Reserve data, households with annual incomes of $94,535 to $205,335 saw the biggest jump in the percentage of households with student-loan debt from 2007-10, the latest figures available. The Journal's analysis defined upper-middle-income households as those with annual incomes between the 80th and 95th percentiles of all households nationwide. Among this group, 25.6 percent had student loan debt in 2010, up from 19.5 percent in 2007. For all households, the portion with student loan debt rose to 19.1 percent in 2010 from 15.2 percent in 2007. The amount borrowed by upper-middle-income families, meanwhile, has soared. They owed an average of $32,869 in college loans in 2010, up from $26,639 in 2007, after adjusting for inflation, according to the Journal's analysis. Read more. (Subscription required.)

ANALYSIS: RECESSION GENERATION OPTS TO RENT – NOT BUY – BIG TICKET ITEMS



Confronting a jobless rate above 8 percent since 2009 and student-loan debt hitting about $1 trillion, 20-to-34-year-olds are renting apartments, cars and even clothing to save money and stay flexible, Bloomberg News reported yesterday. As the Great Depression shaped the attitudes of a generation from 1929 until the early years of World War II, so have the financial crisis and its aftermath affected the outlook of young consumers, said Cliff Zukin, a professor of public policy and political science at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. College graduates earned less coming out of the recession, according to a May study by the John J. Heldrich Center for Workforce Development at Rutgers. Those graduating during 2009-11 earned a median salary in their starting job $3,000 less than the $30,000 seen in 2007. The majority of students owed $20,000 to pay off their education, and 40 percent of the 444 college graduates surveyed said their loan debt is causing them to delay major purchases such as a house or a car. Read more.

LAX BANKING LAW OBSCURED MONEY FLOW IN STANDARD CHARTERED'S MONEY LAUNDERING CASE



The list of global banks that have been accused in recent years of laundering foreign transactions totaling billions of dollars has been growing — Credit Suisse, Lloyds, Barclays, ING, HSBC — and now Standard Chartered, the New York Times reported today. The details in each case are different, with the international banks suspected of using their American subsidiaries to process tainted money for clients that included Iran, Cuba, North Korea, sponsors of terrorist groups and drug cartels. What the cases have in common is that the accused banks took advantage of a law that was not changed until 2008 and that allowed banks to disguise client identities and move their money offshore. The cases, including one filed this week by New York’s banking regulator against Standard Chartered, also cast a harsh light on just how much activity with Iran was permitted in the years leading up to 2008 and whether the practices had violated the spirit, if not the letter, of the law. Foreign banks until 2008 were allowed to transfer money for Iranian clients through their American subsidiaries to a separate offshore institution. In these so-called U-turn transactions, the banks could provide scant information about the client to their American units as long as they stated they had thoroughly vetted the transactions for suspicious activity. Read more.

LATEST ABI PODCAST EXPLORES HEALTH CARE INSOLVENCIES



ABI Executive Director Samuel J. Gerdano talks with Leslie A. Berkoff of Moritt Hock & Hamroff LLP and Robert A. Guy, Jr. of Frost Brown Todd LLC, the lead editors of ABI's Health Care Insolvency Manual, Third Edition. Berkoff and Guy discuss current issues surrounding health care insolvencies, the new health care law and the need to release this year’s new edition of the Health Care Insolvency Manual. To listen to the podcast, please click here.

For more information and to purchase ABI's Health Care Insolvency Manual, please click here.

ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: NATIONAL BANK OF ARKANSAS V. PANTHER MOUNTAIN LAND DEVELOPMENT, LLC (IN RE PANTHER MOUNTAIN LAND DEVELOPMENT, LLC; 8TH CIR.)



Summarized by Adam Ballinger of Lindquist & Vennum, PLLP

The Eighth Circuit ruled that the automatic stay does not apply to an action against a debtor's improvement districts formed under Arkansas law because the improvement districts are property of neither the debtor nor the debtors themselves. The doctrine of equitable laches does not apply because there is no showing of detrimental reliance of the debtor upon a party's failure to raise this particular challenge.

Nearly 600 appellate opinions are summarized on Volo typically 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: SURVEY SHOWS EMPLOYEES USE INTERNAL CHANNELS FOR REPORTING MISCONDUCT



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. Amid concerns that the SEC whistleblower rules will encourage employees to bypass internal protocols and take allegations of misconduct directly to the Commission, a recent blog post reported on a survey by the nonprofit Ethics Resource Center that found that only one out of six employees ever reported misconduct to regulators or other outside channels.

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

- 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.

- 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.

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

November

- U.S./Mexico Restructuring Symposium

     November 7, 2012 | Mexico City, Mexico

- Detroit Consumer Bankruptcy Conference

     November 12, 2012 | Detroit, Mich.

REPORT: MANY CAN'T PAY THEIR DIRECT FEDERAL STUDENT LOANS

Just about four in 10 borrowers with direct federal student loans are paying them back, according to a report released yesterday that offers the first comprehensive snapshot of the program since the government created it in 2010, the Wall Street Journal reported today. Many of the 27.8 million borrowers with these newer direct federal loans aren't yet required to make payments: About 35 percent are still in school or within a six-month grace period after graduation, the report said. But about 18 percent are in programs designed to help distressed borrowers or have returned to school. Nearly 8 percent are in default, meaning the borrower hasn't made a payment in at least a year, according to the Consumer Financial Protection Bureau, the federal regulator that released the report. The report indicates that a significant number of borrowers in the new program are unable to repay. Excluding borrowers who don't yet have to make payments because they are still in school or within the grace period, more than a fifth -- about 22 percent -- are in default or forbearance. Read more. (Subscription required.)

Click here to read the CFPB's report.

COMMENTARY: MOTOWN'S PENSION SHOWDOWN

Detroit's unions have found an unlikely ally in Michigan's Republican Attorney General Bill Schuette, who has taken up their argument that the state constitution precludes federal bankruptcy court from reducing pension benefits, according to an editorial in the Wall Street Journal today. If this view holds, according to the editorial, unions and politicians in financially strapped cities will be able to use chapter 9 as a new political default to shed their bond debts. The Detroit case is likely to set precedents because it's the first large city that has tried to force haircuts on pensioners through bankruptcy. Politicians in the bankrupt cities of Vallejo and Stockton, Calif., sidestepped the issue of whether federal bankruptcy law pre-empts state pension protections after the California Public Employees' Retirement System threatened an expensive legal fight. But with $3.5 billion in unfunded pension liabilities, Detroit can't afford to duck. While the U.S. Constitution's Supremacy Clause would seem to give federal bankruptcy law the upper hand, Congress has traditionally sought to straddle the U.S. system of dual sovereignty by including explicit pre-emptory language in statutes that are intended to supersede state laws. Chapter 9's language doesn't explicitly pre-empt state laws, according to the editorial, but there's a strong case to be made that pre-emption is intrinsic to municipal bankruptcy. The legal tension comes because Michigan's constitution, which passed in 1963, holds that "accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby." Read more. (Subscription required.)

A similar commentary in yesterday's New York Times finds that while it isn't politically feasible for the federal government to bail out Detroit, President Obama and Congress must step in to avert the worst fiscal collapse in urban American history. The commentary makes the case that the government must intervene because the symptoms of the municipal illness that made Detroit, with an estimated $18 billion in liabilities, the largest city in American history to declare bankruptcy are showing up in other cities. Emergency response times are lengthening in cash-starved cities. Libraries, parks and recreation facilities are shortening their hours or closing. Potholes go unfilled, sidewalks unrepaired and trees untrimmed. All that makes urban life rewarding and uplifting is under increasing pressure, in large part because of unaffordable public employee pension and health care costs. Read the full commentary.

For the latest information and analysis about the Detroit case, be sure to visit ABI's dedicated website, http://news.abi.org/Detroit.

PRIVATE-EQUITY PAYOUT DEBT SURGES

Private-equity firms are adding debt to companies they own in order to fund payouts to themselves at a record pace, as fears are mounting that the window for these deals will close if interest rates rise, the Wall Street Journal reported today. So far this year, $47.4 billion of new loans and bonds have been sold by companies to pay dividends to the private-equity firms that own them, according to data provider S&P Capital IQ LCD. That is 62 percent more than the same period last year, which wound up being the biggest year on record, with $64.2 billion sold to fund private-equity payouts. The added debt, known as a recapitalization, can increase companies' risk of default, according to a recent study by Moody's Investors Service. As dividend deals increase, many also are unusually risky lately, carrying low credit ratings and paying historically low interest rates to investors. "This is the leveraged-finance debt market that you can't quite kill," said Richard Farley, a lawyer with Paul Hastings LLP who represents banks in buyouts. Read more. (Subscription required.)

ANALYSIS: RETURN OF MEGA-MERGERS REFLECTS GROWING CONFIDENCE IN ECONOMY



Analysts say that the recent spike in merger activity reflects the return of the mega-merger and a gradual uptick in business confidence in the economy, the Washington Post reported today. It has been most evident in the ongoing battle for Dell computers, with founder Michael Dell upping his bid for the company to $25 billion Friday, and the high-profile buyout of H.J. Heinz by Warren Buffett's Berkshire Hathaway. Although the number of mergers is down compared with the corresponding period last year, a series of mega-mergers has helped increase the value of merger activity in 2013 to $607 billion from $486 billion during the corresponding period in 2012. Activity is picking up after an uneventful 2012, when no mega-mergers were announced, analysts said. But it is still far from 2011 levels, when low valuations contributed to a rush for deals. Read more.

CONSUMER SPENDING, INCOME CLIMB IN JUNE



U.S. consumer spending increased and inflation pushed higher in June, which could strengthen expectations that the Federal Reserve will curtail its bond purchases later this year, Reuters reported on Friday. The Commerce Department said on Friday that consumer spending rose 0.5 percent, lifted by automobile purchases and higher gasoline prices. May's increase was revised down to 0.2 percent from a previously reported 0.3 percent. June's increase in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was in line with economists' expectations. With prices picking up, consumer spending adjusted for inflation nudged up 0.1 percent. The consumer spending numbers were included in the second-quarter GDP report on Wednesday, which showed that the economy grew at a 1.7 percent annual pace after expanding at a 1.1 percent rate in the first three months of the year. 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 ON FRIDAY



The 5th stop for the ABI Golf Tour is the Hershey Country Club, held in conjunction with this 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 at July’s Southeast Conference. 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: CHARLES W. RIES V. SCARLETT & GUCCIARDO, PA, ET AL. (8TH CIR.)



Summarized by Michael Cooley of Akin Gump Strauss Hauer & Feld LLP

Applying the plain language of Fed. R. Civ. P. 15(c)(1), the Eighth Circuit affirmed the principle that whether the party seeking to amend a pleading knew, when the original pleading was filed, of the identity of the party left out is irrelevant to the question of whether the amended pleading may relate back to the date of the original pleading. Rather, the ability to relate back an amendment to the date of the original pleading depends on whether the party to be added knew or should have known that, but for the mistake, it would have been named in the original pleading. Additionally, this case serves as an important reminder of the value in structuring settlement agreements to safeguard against the possibility that a bankruptcy filing thereafter could leave the nondebtor party to disgorge settlement payments as preferential transfers without the ability to resurrect the claims originally settled in consideration therefore.

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: ONLY CONGRESS THINKS MAIN STREET BANKS ARE "TBTF"

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. Removing the arbitrary size designation for systemically important financial institutions would reduce costly regulation for regional banks, encourage industrywide competition and concentrate regulators' efforts on firms that actually warrant attention, 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

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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2013

August

- Mid-Atlantic Bankruptcy Workshop

    August 8-10, 2013 | Hershey, Pa.

- abiLIVE Webinar: How Will the New U.S. Trustee Fee Guidelines Impact You?

     August 20, 2013

- 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.

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

    Sept. 18-19, 2013 | New York

- abiLIVE Webinar: Complex Requirements and Ethical Duties of Representing Consumer Debtors

     Sept. 24, 2013

- Bankruptcy 2013: Views from the Bench

    Sept. 27, 2013 | Washington, D.C.

October

- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum

    Oct. 4, 2013 | Kansas City, Mo.

- Professional Development Program

    Oct. 11, 2013 | New York, N.Y.

- Chicago Consumer Bankruptcy Conference

    Oct. 14, 2013 | Chicago, Ill.

- International Insolvency & Restructuring Symposium

    Oct. 25, 2013 | Berlin, Germany

November

- Complex Financial Restructuring Program

   Nov. 7, 2013 | Philadelphia, Pa.

- Corporate Restructuring Competition

   Nov. 7-8, 2013 | Philadelphia, Pa.

- Austin Advanced Consumer Bankruptcy Practice Institute

   Nov. 10-12, 2013 | Austin, Texas

- Detroit Consumer Bankruptcy Conference

   Nov. 11, 2013 | Detroit, Mich.

December

- Winter Leadership Conference

    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.

- ABI/St. John’s Bankruptcy Mediation Training

    Dec. 8-12, 2013 | New York

DETROIT LOOKS TO REENGINEER HOW CITY GOVERNMENT WORKS

The nation's largest municipal bankruptcy case revealed a startling level of dysfunction inside Detroit's government, including meter maids who were required to wear pants without pockets to prevent the theft of city funds and a jury-rigged firehouse alarm system that relied on a fax machine, the Wall Street Journal reported yesterday. "We found many practices that made no sense," said Chuck Moore, a consultant from restructuring firm Conway MacKenzie Inc. whose team has been embedded in the city's government for more than a year. As the city prepares to exit bankruptcy court, it will have to learn a new approach to providing basic services while staying within its means. Detroit plans to spend $1.7 billion over the next decade to improve services, earmarking about $400 million to tear down abandoned houses, $100 million toward a more reliable bus system, $260 million to make its streets safer and more than $150 million to upgrade outdated technology. "Detroit's inability to provide adequate municipal services runs deep and has for years," U.S. Bankruptcy Judge Steven Rhodes said in his ruling Friday approving the city's restructuring plan, which calls for cutting $7 billion in debt. "It is inhumane and intolerable, and it must be fixed." The process of re-engineering how Detroit works is expected to be bumpy. Financial experts who examined the city's operations say that Detroit remains burdened by out-of-date union rules, local laws and charter provisions. Consequently, Detroit is facing pressure to change the way it does business. Click here to read the full article (subscription required).

Click here to read the transcript of the Oral Opinion on the Record from the Detroit proceedings. To hear a reading of the transcript, click here.

OPPONENTS SAY DETROIT BANKRUPTCY ILLEGAL, PLAN APPEAL

Critics of Michigan's emergency manager law and Detroit's bankruptcy pledged yesterday to keep up their fight against what they called an illegal and immoral attack on a predominantly African-American city, the Detroit Free Press reported yesterday. The groups alleged that the city's bankruptcy exit plan unfairly benefits financial institutions on the backs of retirees of modest means and the poor. Members of Detroiters Resisting Emergency Management and other activist groups say that Detroit's bankruptcy amounted to wealthy banks and other investors getting off easily while impoverished Detroiters continue to face deep sacrifices, including losing homes and access to affordable water, and enduring cuts to pensions and health care. The group We the People of Detroit has also spoken out against bankruptcy deals that reduced pensions and health care for city workers and retirees while giving creditors valuable city real estate. Detroit Water and Sewerage Department retiree William Davis, a member of the Detroit Active and Retired City Employees Association, said that he and others in his group were formulating appeals of U.S. Bankruptcy Judge Steven Rhodes' ruling. Davis, an African-American, said that black Detroiters are bearing the brunt of the bankruptcy, and that few seem to care. "I personally think they all need to go to jail," Davis said of the leaders behind the bankruptcy. "We think this whole process is illegal and just wrong." Click here to read the full article.

ANALYSIS: CAN YOU REALLY END "TOO BIG TO FAIL"?

Taxpayer bailouts of banks will be a thing of the past once rules being hammered out in Switzerland are implemented, or so regulators would have us believe, according to an analysis in the Wall Street Journal yesterday. The world's 30 biggest and most systemically important banks will have to hold up to a fifth of their risk-weighted assets in equity or debt on which investors can take losses if total loss-absorbing capacity (TLAC) proposals unveiled Monday by the Financial Stability Board, a Basel-based international regulatory committee, are adopted. The plans, which would be set in place in 2019 at the earliest, are intended to avoid the chaos, confusion and public-sector rescues of private institutions that characterized the financial crisis triggered by the Lehman Brothers bankruptcy. Instead, if one of these institutions runs into problems because it's been badly run, shareholders and investors of its riskiest tranches of debt will have to suffer the losses. But if investors know they'll be rescued ahead of time, markets might tend to break down more often on the theory that people who are insured will take greater risks than they might have otherwise taken. Banks are critical to the efficient running of a market economy in ways other firms aren't, so when a financial crisis hits, the ramifications can be widespread and self-sustaining — and bank failures trigger further failures in a domino effect. Given the moral hazard risk, central banks are keen to ensure that banks have enough capital to bear the costs of their own bad judgment rather than shifting them onto the general population — hence, a 16 to 20 percent buffer, although even that understates the true scale of the buffer, according to banking specialists. Firms forced into liquidation typically sell assets at a discount to the going rate. Factoring those losses in, the actual buffer will be as much as a quarter of risk capital. But will it work? Click here to read the full analysis.

DINGED CREDIT? CARD ISSUERS ARE HAPPY TO LEND

Consumers with dinged credit are back in a borrowing mood, and lenders are more than happy to give them new credit cards, CNBC reported yesterday. Since the Great Recession ended five years ago, consumers have been gradually taking on more debt and lenders have been accommodating them, easing up on tighter standards. Much of the growth has been in so-called non-revolving credit, especially car loans, thanks to record-low interest rates. But revolving credit — mainly in the form of credit cards — is picking up. And the biggest growth in new credit cards is coming from subprime borrowers whose credit scores are less than 660, according to the latest Equifax data. Through July of this year, banks handed out cards to 9.8 million subprime consumers, a six-year high and an increase of 43 percent from the same period last year. Lenders are also giving subprime borrowers higher credit limits. Part of the growth is the result of an easing of the tighter standards that followed the 2008 credit bust after the boom of the early-2000s. Now that banks have repaired the damage from billions of dollars in bad debts, they're better able to take on more risk. As they hand out more accounts and higher limits to consumers with lower credit scores, though, lenders face a higher risk that they won't get paid back. As a result, some card issuers are bracing for a fresh round of bad debts by setting aside more in reserve to cover the cost of charging off unpaid card balances. But card companies are largely banking on profits from issuing new credit cards more than offsetting those higher loan losses. Click here to read the full article.

ANALYSIS: WHAT IF THE MUCH-EXPECTED ECONOMIC GROWTH BURST IS ACTUALLY A BUST?

After last Friday's good news of continued job growth and falling unemployment, economists are starting to wonder aloud how soon unemployment will reach its "natural" or "long-term" rate, according to a Wall Street Journal analysis today. If 5 percent unemployment is achieved in 2015, as some predict, how much room will be left for economic recovery? We've been thinking of the U.S. economy as being below its potential for so many years that it comes as a shock when the data suggest that we might be approaching a new normal, according to the analysis. A working paper by Northwestern University economist Robert Gordon in August lays out the case for pessimism. He runs through several scenarios to try to justify optimistic growth forecasts like that of the Congressional Budget Office. During economic recoveries, growth and employment usually rise hand-in-hand. If the unemployment rate is an accurate indicator, Gordon argues, there is little room left for recovery in growth, and there is little room for improvement in the utilization of industrial capacity, which is only slightly below the levels attained during recent expansions. The last hope for a sudden return of growth is an unexpected boost in productivity. That would be welcome, but there is no reason to expect a sudden change. With the distinct possibility that the long-predicted growth burst will never arrive, policymakers should take seriously warnings about unfunded U.S. obligations and should welcome even small tweaks to policy that could improve efficiency by easing regulations on economic activity. Click here to read the full analysis.

Click here to read Robert Gordon's report, "A New Method of Estimating Potential Real GDP Growth: Implications for the Labor Market and the Debt/GDP Ratio."

USTP NOTICE OF PROPOSED RULEMAKING ON CHAPTER 11 MONTHLY OPERATING REPORTS

Section 602 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) authorizes the U.S. Trustee Program (USTP) to issue rules requiring uniform periodic reports by debtors in possession or trustees in non-small business cases under chapter 11. The USTP just published in the Federal Register a notice of proposed rulemaking seeking public comment on the proposed rule and periodic report forms. The proposed rule is published in the Federal Register at 79 FR 66659 (Nov. 10, 2014) (to be codified at 28 C.F.R. pt. 58). The proposed rule, along with the proposed periodic report forms and instructions, may be viewed on the USTP's website. The proposed rule may also be accessed at www.regulations.gov. All public comments must be submitted on or before January 9, 2015, via www.regulations.gov. Please note that the proposed rule and forms only apply in chapter 11 cases filed by debtors that are not small businesses. Small business debtors are already required to use Official Form 25C, "Small Business Monthly Operating Report."

NOW AVAILABLE FOR PRE-ORDER: BEST OF ABI 2014 BOOK BUNDLE

Now available for pre-order in the ABI Bookstore is the Best of ABI 2014 book bundle containing The Year in Business Bankruptcy and The Year in Consumer Bankruptcy. These must-have references contain the best ABI Journal articles and papers from ABI's top-rated educational seminars, with Spring 2014 ABI Resident Scholar Prof. Charles Tabb selecting the most important developments in business bankruptcy and Fall 2014 ABI Resident Scholar Prof. Lois Lupica choosing important consumer bankruptcy developments. Make sure to log in to the site to get your discounted ABI member pricing. The ABI member price for each book is $50, but take advantage of this bundle offer and save even more! The books will ship in early December. Click here to order.

NEXT FREE COMMITTEE TELECONFERENCE WILL BE TOMORROW'S ASSET SALES COMMITTEE CALL ON CHAPTER 11 COMMISSION PROPOSAL!

Members are encouraged to dial-in and listen to or participate on upcoming ABI Committee conference calls. While committee membership is encouraged, it is not required to join the free teleconferences. Upcoming committee teleconferences include:

- Asset Sales Committee: Wednesday, Nov. 12; 4 p.m. ET

Topic: "Chapter 11 Reform Commission's Consideration of a Proposal to Surcharge Secured Lenders for 363 Asset Sales"

Speakers: Kathryn A. Coleman of Hughes Hubbard & Reed LLP and Gregory A. Bray. Moderator: Risa Wolf-Smith of Holland & Hart LLP.

All committee teleconferences are free to ABI members, and registration is not required. Simply utilize the following dial-in information:



Call in: (712) 432-1500

Participant code: 692933

NEXT ABI LIVE WEBINAR ON NOV. 20 FOCUSES ON PROFESSIONAL FEE CASE BEFORE THE SUPREME COURT

The next abiLIVE webinar will be held on Nov. 20 and will feature a discussion on a case before the Supreme Court that could have a major impact on professional fees for bankruptcy practitioners. In this 75-minute webinar, Thomas J. Salerno of Gordon Silver (Phoenix) and J. Maxwell Tucker of Squire Patton Boggs LLP (Dallas), along with moderator Judge Gregg W. Zive (D. Nev.; Reno, Nevada), will discuss the professional fee issues presented in Baker Botts LLP v. ASARCO LLC, No. 14-103, which was granted certiorari by the Supreme Court on Oct. 2. Click here to register for this important webinar!

ABI MEMBERS IN SOUTHERN CALIFORNIA: DON'T MISS TOMORROW'S SPECIAL TMA EVENT TO BENEFIT THE WOUNDED WARRIOR PROJECT

ABI members are invited to attend TMA Southern California's special fundraiser to support the Wounded Warrior Project and SoCal veteran support groups on Nov. 12 at the Beverly Hilton. Funds raised will benefit the Wounded Warrior Project, Veterans Legal Institute and the Public Law Center. For more information or to attend, please click here.

ABI MEMBERS INVITED TO ATTEND RETIREMENT DINNER FOR BANKRUPTCY JUDGE PETER J. WALSH ON NOV. 19

ABI members are invited to a special retirement dinner on Nov. 19 honoring the Hon. Peter J. Walsh's 50 years of dedicated service to the bench and bar. The event will be held at the Chase Center on the Riverfront in Wilmington, Del., and is being hosted by the Bankruptcy Section of the Delaware State Bar Association and the Delaware Chapter of the Federal Bar Association. Questions should be directed to Karen B. Owens at 302-654-1888. To attend, please go to https://sites-pepperhamilton.vuturevx.com/107/772/uploads/judge-walsh-retirement-dinner-form.pdf

ABI MEMBERS WELCOME TO ATTEND TRIBUTE DINNER ON DEC. 11 TO HONOR BANKRUPTCY JUDGE STEVEN W. RHODES

ABI members are invited to attend a tribute dinner honoring the 29 years of service of Bankruptcy Judge Steven W. Rhodes of the United States Bankruptcy Court for the Eastern District of Michigan for his commitment to the bench, bar and community. The Tribute Dinner will be held at the Roostertail on the Detroit River and is being hosted by the Bankruptcy Community to honor and celebrate Judge Rhodes' service and career. Please contact David Lerner at (248) 901-4010 for more information. To attend, please go to http://www.cbadetroit.com/events/Judge-Rhodes-USBC-Invite-and-Form.pdf

NEW CASE SUMMARY ON VOLO: SUSQUEHANNA BANK V. USA/IRS (IN RE RESTIVO AUTO BODY; 4TH CIR.)

Summarized by Ann Brogan of Crowley, Liberatore, Ryan & Brogan, P.C.

The Fourth Circuit affirmed the judgment of the U.S. District Court for the District of Baltimore affirming an appeal from the bankruptcy court but reversed the lower court, finding that Maryland's relation back statute applied. Instead, the Fourth Circuit upheld the alternative holding of the district court that the Maryland doctrine of equitable conversion gave the bank deed-of-trust priority over the IRS lien.

There are more than 1,500 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: CRAMDOWN HURDLES, AND HOW TO PLAY THE CLASSIFICATION GAME (OR NOT)

A recent blog post takes a look at what happens when an amended reorganization plan creates separate classes of unsecured creditors, and whether it is always reasonable to do so.

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 single set of mandatory, uniform federal bankruptcy exemptions should be adopted.

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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2014

November
- abiLIVE Webinar
    Nov. 20, 2014

December
- Winter Leadership Conference
    Dec. 4-6, 2014 | Palm Springs, Calif.

- 40-Hour Mediation Training Program
   Dec. 7-11, 2014 | New York

January
- New Orleans Consumer Bankruptcy Conference
    Jan. 19, 2015 | New Orleans

- Rocky Mountain Bankruptcy Conference
    Jan. 22-23, 2015 | Denver

February
- Caribbean Insolvency Symposium
    Feb. 5-7, 2015 | Grand Cayman, Cayman Islands

- VALCON 2015
    Feb. 25-27, 2015 | Las Vegas

March
- Bankruptcy Battleground West
    March 24, 2015 | Los Angeles, Calif.

ANALYSIS: WHEN LENDERS ARE NOT PAID BACK

Much of the lending done in the U.S. relies on having both collateral and contractual obligations (loan covenants) that together provide the lender with assurance that the funds lent out will be repaid. Rather than putting up physical assets as collateral, governments often instead promise to repay bondholders out of a dedicated stream of income, such as via the tolls collected on a bridge or out of unspecified revenue from future taxes. It is not surprising, then, that a financial crisis involving trillions of dollars of bad loans led to legal conflicts and policy debates about the role of collateral and the sanctity of contracts, according to an analysis in today's New York Times Economix Blog. It seems likely that people owed money by the city of Detroit will get less than promised. One of the many elements in the city's bankruptcy proceedings is the treatment of the holders of general obligation bonds, which constitute $530 million out of the city's $18 billion in total debt. In the past, this type of municipal bond was considered relatively safe in that the borrowing authority was seen as having an implicit commitment to raise taxes as necessary to pay off the obligation. The proposal from Kevyn Orr, Detroit's emergency manager, however, would have these bonds paid back at only 20 cents on the dollar. With Detroit city services already threadbare, and with Orr's bankruptcy proposal foisting losses on retired city workers and current employees through reductions in pensions and other benefits, it seems only fair for bondholders to share in the pain. Bond insurers are likely to file suit, but success by Orr in upending the heretofore accepted view of general obligation bonds could inflict considerable pain on other municipal borrowers, who might well expect to pay higher interest rates to investors nervous that one day other cities might follow Detroit's example. Click here to read the full analysis.

COMMENTARY: NO BANKER LEFT BEHIND

The Detroit bankruptcy case has been cast as a contest between bondholders and pensioners that can be resolved only by shared sacrifice. In principle, there is no problem with that, although in practice, the pensioners' fair share will have to take into account their extreme vulnerability: Public pensions are not federally insured, and many municipal retirees do not receive Social Security. What is problematic is shared sacrifice that does not seem to apply to the big banks that abetted Detroit's descent into bankruptcy, according to a commentary in Friday's New York Times. Just days before its bankruptcy filing last month, Detroit reached its first settlement with creditors. The settlement was with UBS and Bank of America, and although the precise terms will not be nailed down until the bankruptcy judge weighs in, Detroit is set to pay an estimated $250 million to terminate a soured derivatives transaction from 2005 that was supposed to protect Detroit from rising interest payments on a chunk of its variable rate debt. By 2009, both interest rates and the city's credit rating were falling, forcing Detroit to pay the banks some $50 million a year and to pledge roughly $11 million a month in casino-tax revenue as additional collateral. The banks have agreed in a settlement to a discount of as much as 25 percent off what they are owed. But the haircut doesn't mean that the banks will suffer. The banks' 25 percent hit is nothing compared with the city's suggested 90 percent cut to the pensions' unfunded liability — which will result in benefit cuts that would be disastrous in both human and political terms and that the State of Michigan must prevent from happening, according to the commentary. Click here to read the full commentary.

DETROIT SCHOOLS SELL BONDS, FOR A PRICE

Detroit's public-school system sold $92 million in debt today at a substantial yield premium in the largest Michigan municipal-bond sale since Detroit's bankruptcy filing last month, the Wall Street Journal reported today. The Michigan Finance Authority, which sold the debt for Detroit Public Schools, offered the one-year debt at a yield of 4.375%. That compares with 0.18% on a typical triple-A-rated, one-year municipal bond, according to Thomson Reuters Municipal Market Data. The borrowing is backed by a pledge of state aid, a protection cited by some investors who placed orders for the debt. Still, some investors stayed away. Detroit's bankruptcy, filed July 18, has sparked concerns that municipal bonds may not be as safe as many investors once assumed. Kevyn Orr, the city's emergency manager, has proposed imposing cuts on some muni bondholders as the city looks to restructure more than $18 billion in debt. And while Detroit's school district is a separate entity from the city and isn't involved in its bankruptcy, it has still seen its share of financial struggles. It has been under state control, under a separate emergency manager, since 2009, and it has also lost more than 33,000 students, or 40% of its enrollment base, since 2010, according to S&P. Even so, holders of the one-year debt sold today should get paid even if enrollment falls as much as 33%, according to S&P. Click here to read the full article. (Subscription required.)

TRANSUNION: AUTO LOAN DELINQUENCIES REMAIN FLAT DESPITE INCREASE IN LOAN BALANCES

The national auto loan delinquency rate (the percentage of accounts 60 or more days past due) remained relatively flat year-over-year, moving from 0.79% in Q2 2012 to 0.80% in Q2 2013, according to a newswire report today. On a quarter-over-quarter basis, the auto loan delinquency rate experienced an 8-basis-point drop from 0.88% in Q1 2013, according to data provided by TransUnion's Industry Insights Report. Auto loan balances continue to increase, jumping more than 4% between Q2 2012 ($12,875) and Q2 2013 ($13,435). Every state except for Michigan experienced an increase in average auto loan balances during this time frame. While subprime borrower debt increased more than 7% in the last year, delinquency levels for this segment remained about the same, moving from 4.94% in Q2 2012 to 5.02% in Q2 2013. Click here to read the full article.

ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE SOUTHWEST BANKRUPTCY CONFERENCE ON THURSDAY

The 6th stop for the ABI Golf Tour is on Aug. 22 at the Incline Village Champion course, held in conjunction with ABI's Southwest Bankruptcy Conference. 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 at July's Southeast Bankruptcy Workshop. There's no charge to register or participate in the Tour.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: AMERICAN BANK, FSB V. IN RE CORNERSTONE COMMUNITY BANK (IN RE AMERICAN BANK, FSB; 6TH CIR.)

Summarized by Bryan Robinson of Law Offices of Bryan Robinson

The Sixth Circuit Court of Appeals affirmed the ruling by the district court that, in regards to the competing secured claims by American Bank and Cornerstone Community Bank, in the funds of the insolvent debtor U.S. Insurance Group (USIG), held in an account at Cornerstone, American Bank's interest was superior to Cornerstone's interest and that Cornerstone had no right to the money. The court's decision was based on the Premium Finance Company Act, Tenn. Code Ann. §§ 56-37-101 et seq. (2008), which gave American a senior perfected security interest in the contested funds good against any competing interest claimed by Cornerstone.

There are nearly 1,000 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: § 502(b)(2) AND THE COLLECTION OF POST-PETITION INTEREST

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post discusses the Ninth Circuit's decision that a creditor can collect post-petition interest from a nondebtor party even though the Code prohibits a creditor from asserting a claim for "unmatured interest."

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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2013

August

- 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.

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

    Sept. 18-19, 2013 | New York

- abiLIVE Webinar: Complex Requirements and Ethical Duties of Representing Consumer Debtors

     Sept. 24, 2013

- Bankruptcy 2013: Views from the Bench

    Sept. 27, 2013 | Washington, D.C.

October

- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum

    Oct. 4, 2013 | Kansas City, Mo.

- Professional Development Program

    Oct. 11, 2013 | New York, N.Y.

- Chicago Consumer Bankruptcy Conference

    Oct. 14, 2013 | Chicago, Ill.

- International Insolvency & Restructuring Symposium

    Oct. 25, 2013 | Berlin, Germany

November

- Complex Financial Restructuring Program

   Nov. 7, 2013 | Philadelphia, Pa.

- Corporate Restructuring Competition

   Nov. 7-8, 2013 | Philadelphia, Pa.

- Austin Advanced Consumer Bankruptcy Practice Institute

   Nov. 10-12, 2013 | Austin, Texas

- Detroit Consumer Bankruptcy Conference

   Nov. 11, 2013 | Detroit, Mich.

December

- Winter Leadership Conference

    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.

- ABI/St. John’s Bankruptcy Mediation Training

    Dec. 8-12, 2013 | New York