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A U.S. bankruptcy court judge yesterday approved a $3 million loan from Camden National Bank that will allow the Montreal, Maine and Atlantic Railway to continue operating with two-man crews running the trains, the Bangor (Maine) Daily News reported yesterday. Canadian authorities in August had ordered the railroad to use two-man crews for all hazardous material transportation in response to the July 6 Lac-Megantic disaster, which killed 47 people. The loan is structured as a revolving line of credit up to $3 million and may be used only as working capital, according to court documents. It will be secured by the property and tracks the railroad owns in the U.S. and Canada. “The loan will ensure that the [MMA] and MMA Canada have adequate working capital to continue operating pending a sale of their assets,” bankruptcy trustee Robert Keach wrote in his motion seeking approval of the loan. Without it, the railway would have run out of operating cash by the end of October, Keach said. Eight potential suitors have expressed interest in purchasing MMA’s assets, and seven have signed nondisclosure agreements, Keach confirmed Wednesday. Gordian Group, a New York-based investment bank Keach has secured to handle the sale of MMA’s assets, is speaking with the suitors this week, according to Keach, who hopes to begin the auction by the end of November. The railway sought bankruptcy protection a month after one of its trains rolled driverless down a hill before derailing in the middle of the town of Lac-Megantic, causing the fiery explosion that killed 47 people and destroyed the village’s central business district.

PG&E Corp. (PCG), owner of California’s largest electric utility, said that it may be pushed to the edge of bankruptcy if state regulators impose a proposed $2.25 billion penalty for a deadly 2010 pipeline explosion, Bloomberg reported yesterday. If approved, the company would pay a total of $4 billion, including money already spent on pipeline upgrades and safety work. The San Francisco-based company would need to sell about $2 billion in additional stock. The penalty is more than four times the company’s net income last year and is 15 years’ worth of earnings for its gas business. Moody’s Investors Service and Standard & Poor’s have said they would review California’s regulatory system if the full penalty is assessed.

The U.S. Treasury, under pressure to quickly wind down its crisis-era bailouts, believes that it cannot rush the sale of auto lender Ally Financial because the company's mortgage lending unit is in a messy bankruptcy, Reuters reported on Friday. Ally is one of Treasury's largest remaining holdings, but the lender will be hard to exit as long as it is working through the bankruptcy of its Residential Capital unit and is also selling its international operations. In a report last month, an internal Treasury watchdog said that the agency needed a more concrete plan for repayment of the $17.2 billion it poured into Ally during the crisis. The government's difficulties in exiting Ally show how hard it will be for Treasury to completely close down TARP. Treasury has recovered 93 percent of the $418 billion it put into the program, but remaining companies could take a long time to shed.

JPMorgan Chase & Co., Goldman Sachs Group Inc. and Barclays Plc are among the first banks to register swap-dealer divisions under the Dodd-Frank Act, which requires higher capital, collateral and trading standards, Bloomberg News reported yesterday. The 65 trading units that have registered include the biggest banks in the U.S., U.K., France, Germany, Switzerland and Japan, according to the Commodity Futures Trading Commission. The list, which is expected to grow, reflects companies that had at least $8 billion in swap-dealing business in October and had to register by the end of last year.

ven if President Obama and Republicans in Congress can reach a last-minute compromise that averts some tax increases before today's deadline, experts still foresee a significant drag on the economy in the first half of 2013 from the fiscal impasse in Washington, D.C., the New York Times reported today. While negotiators in the capital focus on keeping Bush-era tax rates in place for all but the wealthiest Americans, other tax increases are expected to go into effect regardless of what happens in the coming days. For example, a two percentage point jump in payroll taxes for Social Security is all but certain after Jan. 1, a change that will equal an additional $2,000 from the paycheck of a worker earning $100,000 a year. Many observers initially expected the lower payroll-tax deduction rate of 4.2 percent to be preserved. But in recent weeks, as it became clear that political leaders were prepared to let that rate rise to 6.2 percent, economists reduced their predictions for growth in the first quarter accordingly.

Berkshire Hathaway Inc. agreed to buy Oriental Trading Co., a mail-order toy and novelty vendor located in Berkshire's hometown of Omaha, Neb., the Wall Street Journal reported today. The company agreed to pay about $500 million for Oriental Trading. The sale will mark a payday for Oriental Trading's shareholders, KKR & Co. being the largest, which bought the company out of bankruptcy 18 months ago. In the last 12 months, Oriental Trading made about $70 million in earnings before interest, taxes, depreciation and amortization by selling party supplies, crafts, decorations and toys through the Internet as well as print catalogs. Private-equity firm KKR owns a one-third stake that it purchased through its KKR Asset Management business. KKR was a creditor to Oriental Trading and exchanged the debt for stock in the company when it exited from bankruptcy in February 2011.

Defunct Lehman Brothers Holdings Inc. and its affiliates had $14.3 billion in restricted cash on Sept. 30, including $10.9 billion of reserves for claims, Bloomberg News reported yesterday. Free cash and investments totaled almost $11 billion, according to a court filing. The claim reserves include $5.8 billion held for disputed amounts, Lehman said. The former investment bank plans two payments to creditors every year. The last payment was Oct. 1. Lehman, which four years after filing the biggest U.S. bankruptcy continues to sell assets to pay creditors, made a first payment of $22.5 billion in April and a second installment of $10.2 billion this month.

ABI's Commission to Study the Reform of Chapter 11, whose 22 members constitute a venerable bankruptcy industry Hall of Fame, held a hearing yesterday to gather feedback on what is right and wrong with the statutory scheme that has governed chapter 11 bankruptcy since 1978, Reuters reported. The commission's charge includes "literally considering starting from scratch and re-inventing the statute," said Robert Keach, attorney and commission co-chairman. The commission plans to eventually submit a report to Congress, targeted for April, 2014, that could serve as "part blueprint, part outline" for new legislation, Keach said. The commission will study 13 areas of bankruptcy law, including labor & benefits issues, financing rules and government supervision. It is collecting feedback from several groups through a series of hearings, with upcoming dates at the National Conference of Bankruptcy Judges in San Diego on Oct. 26, and a convention of trade group the Turnaround Management Association in Boston on Nov. 3. Read more:
http://www.reuters.com/article/2012/10/18/bankruptcy-reform-idUSL1E8LHP…

To obtain the prepared witness testimony from yesterday's hearing, view background information on the Commission members or to see upcoming dates of activity, please click here: http://commission.abi.org/

The Treasury Department is resisting a push by General Motors Co. to sell the government's entire stake in the automaker, the Wall Street Journal reported today. U.S. taxpayers kept the nation's largest automaker by sales afloat with a $50 billion bailout in 2009 and now own 26.5 percent of the Detroit company. But GM executives have grown increasingly frustrated with that ownership, and the stigma of being known as "Government Motors." Executives have said that the U.S.'s shadow is a drag on its reputation and hurts the company's ability to recruit talent because of pay restrictions. Earlier this summer, GM floated a plan with Treasury officials to repurchase 200 million of the roughly 500 million shares the U.S. holds in the automaker. Under the plan, Treasury would sell the remaining shares through a public stock offering. But Treasury officials are not interested in GM's offer at the current price and are not in a rush to offload shares. The biggest reason: A sale now would leave the government with a hefty loss on its investment.

When the next crisis brings a major financial firm to its knees, U.S. regulators will seize the parent company but allow its units around the globe to keep operating while the mess is cleaned up, according to a plan to be announced today from the Federal Deposit Insurance Corp., the Wall Street Journal reported. The equity stakeholders of the large bank or other financial firm will be wiped out, and bondholders will face losses as their holdings are swapped for equity in a new entity, as a part of the FDIC's plan. If several federal agencies and the Treasury Department agree to seize a firm, the FDIC will unwind the parent bank holding company of the faltering firm, placing it in receivership and revoking its charter. The firm's subsidiaries around the world would continue to operate, supported with liquidity the FDIC-held parent company can borrow from the government under the Dodd-Frank financial overhaul. Next, the FDIC would transfer most of the firm's assets and some of its liabilities into what's known as a "bridge company," according to FDIC officials. There, regulators would oversee a debt-for-equity swap akin to what occurs under a chapter 11 restructuring: Equity holders would be wiped out, but creditors would get equity in exchange for the claims they held. The company eventually would emerge from the process as a new, recapitalized private entity.