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Bankruptcy Judge Brendan L. Shannon yesterday approved a quick auction of Hollywood special-effects company Digital Domain Media Group Inc , but said that he may reconsider what he called an "unprecedented" schedule setting up next week's sale, Reuters reported yesterday. The company that won an Academy Award for its work on "Titanic" filed for bankruptcy on Tuesday with only $50,000 in the bank and unable to meet Friday's payroll, its attorney, Robert Feinstein, told the court yesterday. Digital Domain Chief Executive Ed Ulbrich told the court that Hollywood studios would begin pulling work from the company today unless it had an emergency loan and an agreement to auction the company to a better-financed owner on Sept. 21. After seven hours of nonstop arguments Judge Shannon called the case "deeply troubling" and said he was being asked to "call a bluff" on threats the company would be forced to close its doors without a quick sale. While approving a loan to keep the company afloat and the proposed auction date, he also set a Sept. 20 hearing to reconsider his decision.

Fletcher International Ltd., a bankrupt hedge fund managed by the investment firm of Alphonse “Buddy” Fletcher, will have a trustee oversee its bankruptcy, against the wishes of its parent company, Bloomberg News reported on Friday. Bankruptcy Judge Robert Gerber on Friday approved the company’s motion to appoint a chapter 11 trustee after a hearing on Sept. 5. Fletcher Asset Management Inc., the investment manager and parent of the company, had objected, saying that an examiner would be better to resolve a dispute in the case than a federal trustee. Fletcher International filed for bankruptcy protection June 29, listing assets of about $52.5 million and liabilities of about $23.8 million. The numbers are uncertain, according to the bankruptcy filing, because there is no active trading market for some of the assets and some of the liabilities may be disputed.

Bankruptcy Judge Stuart Bernstein on Friday denied a proposal to give eight top Hawker Beechcraft executives up to $5.3 million in bonuses, the Associated Press reported on Friday. Judge Bernstein found that the bonus plan sets the bar too low to qualify as anything other than a retention program for insiders. The International Association of Machinists and Aerospace Workers had opposed it, as did the U.S. Trustee in the case.

Arguing that tribal leaders have the power to seek bankruptcy protection for their businesses on reservation land, attorneys for the Santa Ysabel Resort and Casino defended the company's request for chapter 11 against creditors who want the case thrown out, Dow Jones DBR Small Cap reported today. Leaders of the San Diego-area casino, which is owned and run by the Iipay Nation of Santa Ysabel, said that they agreed to put the casino in bankruptcy on July 2 as they strained to pay back more than $40 million owed to lenders and others who lent money for the gambling operation's construction in 2007. Casino attorney Ron Bender said in court papers that the casino deserves bankruptcy protection even though the pages of the U.S. Bankruptcy Code do not directly mention Indian tribes.

Six weeks after the collapse of Peregrine Financial Group, tensions are rising between customers clamoring for the release of frozen funds and a bankruptcy trustee skeptical of records at a brokerage whose CEO confessed to forging financial data, Reuters reported yesterday. Customers say that Ira Bodenstein, the trustee in charge of recovering client money, is delaying payouts and keeping the customers in the dark as to why. Bodenstein rejects the criticism, saying that the firm's fabricated financials make him doubt the accuracy of the firm's accounting for its 24,000 clients.

Restructuring professionals say that companies in bankruptcy court are increasingly facing off with Justice Department watchdogs over important matters such as court venue and executive bonuses, the Wall Street Journal reported today. U.S. Trustee recently objected to the venue choice made by Houghton Mifflin Harcourt Publishing Co., the educational publisher that in May filed for chapter 11 in Manhattan. The company sought to cut more than $3 billion in debt off its balance sheet through a plan supported by more than 90 percent of its creditors. The trustee thought that Boston-based Houghton Mifflin made the wrong venue choice and urged the judge to move the case. Yet Philip Dublin of Akin Gump Strauss Hauer & Feld LLP, who represented a group of the publisher's creditors, said a change of venue would jeopardize a crucial $500 million financing deal, leaving the company "with potentially no way out of bankruptcy." Restructuring professionals say the trustees' increasingly fastidious approach comes from the director of the U.S. Trustee Program, Clifford J. White III, who is vehement that trustees uphold the letter of the law and the integrity of the bankruptcy system. "The U.S. trustees' objectives are to preserve the integrity of the bankruptcy system," said Kenneth Klee of boutique bankruptcy law firm Klee, Tuchin, Bogdanoff & Stern LLP. "Sometimes in doing so it will not be in the best interest of a particular company."

Pfizer Inc.'s non-operating Quigley Co. unit won permission to have creditors vote on a bankruptcy plan that would bar most asbestos claims against the two companies, as a judge said that the issue of whether Pfizer bought votes will be addressed later, Bloomberg News reported yesterday. Bankruptcy Judge Stuart Bernstein yesterday approved Quigley's sixth reorganization plan draft after objections that it will not resolve whether Pfizer devised the plan in bad faith and manipulated the bankruptcy for its benefit. An issue that keeps resurfacing -- whether Pfizer’s actions are “just another attempt to buy the vote” of asbestos claimants -- will be addressed at a trial when Quigley seeks final confirmation of its plan after a vote, Judge Bernstein said.

Capitol Bancorp Ltd. sought bankruptcy protection in a bid to implement a debt-for-equity swap, warning that its community banks are "dangerously close" to an FDIC takeover, Dow Jones DBR Small Cap reported today. Under the company's proposed reorganization plan, holders of nearly $6.82 million outstanding in senior notes would receive stock in the reorganized company valued at $6.82 million. Holders of $151.3 million outstanding in trust preferred securities would receive new stock valued at about $50 million.

A new bankruptcy study by two university professors found that incentive bonus plans for managers of bankrupt companies "significantly improve" outcomes for creditors, the Wall Street Journal's Bankruptcy Beat Blog reported on Friday. "Firms that adopt these plans—especially the incentive plans—are more likely to emerge, have shorter duration in restructuring and are less likely to violate the absolute priority rule under bankruptcy law," said Wei Wang, an assistant professor of business at Queen’s University. The study titled "Provision of Management Incentives in Bankrupt Firms" looked at 417 large public companies that filed for chapter 11 between 1996 and 2007. Of those, about 39 percent offered retention and incentive plans to key employees and the researchers looked at what effect, if any, those plans had on the outcomes of the bankruptcy cases. Wang, who co-authored the study with Vidhan K. Goyal, a finance professor at the Hong Kong University of Science and Technology, also said that the research does not support the common view among many bankruptcy observers that bonus plans enrich managers at the expense of creditors. On the contrary, creditor control—for example, when a hedge fund or lender is directing the bankruptcy case—increases the likelihood that bankrupt firms offer retention and incentive bonuses to managers, he said. Wang added that while it is true that retention plans did not have any impact on chapter 11 cases, companies that adopted incentive bonuses spent less time in bankruptcy and were in better shape when they emerged. To read the study, please click here: https://www.documentcloud.org/documents/408293-kerpaugust8.html

Santa Ysabel Resort and Casino—too broke to build its resort and too small to lure many gamblers to its casino on a reservation outside San Diego—is about to test whether or not Native American enterprises are eligible for protection under U.S. bankruptcy law, the Wall Street Journal reported today. The casino's biggest lender, another Indian tribe, has asked a San Diego bankruptcy judge to toss out the filing by the Iipay Nation of Santa Ysabel, arguing that tribes and some of the tribal businesses they own do not qualify for bankruptcy relief. The casino filed for chapter 11 protection last month, citing debts of more than $40 million. It had borrowed $26 million from JPMorgan Chase in 2005 to build a 37,000-square foot casino and a hotel. The tribe could not afford to pay for building materials and the hotel was never constructed, according to court papers. The casino opened in 2007 with poker tables and about 350 slot machines. The Yavapai-Apache Nation, a federally recognized tribe in Arizona, lent it $7 million and later bought JPMorgan's debt. However, the casino fell behind on loan payments, and the Yavapai-Apache Nation won a $9 million tribal court judgment in February.