About a quarter of the casino jobs that propped up Atlantic City, N.J., for more than three decades are on the line as one gambling house closed in January, two more plan to in the next two months and a fourth — the $2.4 billion Revel that promised to transform the town from a bastion of gamblers into a destination for the glitterati — is seeking a buyer in bankruptcy, Bloomberg News reported today. Once the East Coast’s gambling hub, Atlantic City has suffered as casinos opened in neighboring states including Pennsylvania and New York after they legalized gambling or expanded betting to increase tax revenue. Even as Caesars Entertainment Corp. plans to close its money-losing Showboat casino in New Jersey, it’s opening the Horseshoe in Baltimore next month. The city’s 11 gambling houses account for almost half its jobs: 5,883 positions in a workforce of 13,500. The Atlantic Club closed in January, putting 1,600 people out of work. The shuttering of Caesars’ Showboat on Aug. 31 will wipe out 2,133 jobs. Trump Plaza Hotel & Casino said it plans to close Sept. 16, taking away another 1,009. Revel employs 3,106 people. About one-fifth of the 30,000 people registered as casino workers with the state Division of Gaming Enforcement live in Atlantic City, the most in a single zip code.
The House Judiciary Committee will hold a hearing Tuesday afternoon on bipartisan legislation ("The Financial Institution Bankruptcy Act of 2014") designed to use the Bankruptcy Code for the purpose of an orderly liquidation of a large financial institution. ABI members can get a preview of the new bill during a live webinar today at 1 pm (ET). Speakers for the webinar include Profs. Thomas Jackson of the University of Rochester and Stephen Lubben of Seton Hall Law School), both of whom will be testifying before the Committee. To register for today’s webinar, please click here: http://www.abiworld.org/webinars/2014/LEGIS/index.html
The bill would create a new subchapter V of chapter 11, where the assets of the financially-troubled institution would be transferred to a bridge company, while leaving its stock and long-term unsecured debt behind in the old institution, in a process referred to as "single point of entry” (SPOE). Work would begin to transfer ownership of the bridge holding company to the private sector. The left-behind subordinated debt of the troubled firm would be used as the immediate source of capital for the new entity. Remaining debt claims would be converted into equity claims that would also serve to capitalize the new private-sector entity.
The SPOE strategy is, in essence, a "bail-in" strategy because it implements a resolution process that imposes losses on shareholders and unsecured creditors, rather than on the deposit insurance fund, the government or the taxpayers. More specifically, holding company shareholders would bear the losses first and one would expect that they will be wiped out; holding company creditors will likely bear losses as well, and would receive equity in the newly reorganized holding company in place of the debt, reflecting the value of what remains in the holding company. A new board and management would be put in place.
The difference between a bailout and a bail-in is the source of funding. In a bail-out, the funds essentially come from outside the institution, usually in the form of taxpayer assistance via a direct intervention by the sovereign government. Conversely, in a bail-in, rescue funds come from within the institution as shareholders and unsecured creditors bear the losses.
The bill is an alternative to the Orderly Liquidation Authority of the Dodd-Frank Act, while not explicitly repealing it. OLA is controversial because some critics believe it could lead to a Federal bailout of systemically important financial institutions. The new bill does not provide explicit liquidity guarantees, such as a credit support facility, and is in this way similar to S. 1861. However the Senate bill also repeals Title II of Dodd-Frank. Speakers at the ABI webinar will compare and contrast the Senate bill as well.
The webinar, "Proposed Chapter 14 and the Future of Large Financial Institution Resolution," hosted by ABI's Legislation Committee, is a rare chance to hear leading experts on this important policy, now under active consideration in Congress. http://www.abiworld.org/webinars/2014/LEGIS/index.html
An investment group that owns a piece of a major telecom firm in the Republic of Georgia filed for bankruptcy in a U.S. court on Monday, facing a deadline to pay more than $11 million to noteholders, Dow Jones Daily Bankruptcy Review reported today. MIG LLC, which operates as Metromedia International Group Inc., filed for chapter 11 protection in Wilmington, Del., blaming a dispute that stopped the flow of profits from its only major investment: a 46 percent stake in the ownership group that owns telephone provider Magticom Ltd.
A fee examiner tasked with keeping costs down in the American Airlines bankruptcy recommended this week that a court approve nearly $400 million in fees and expenses earned by professionals who he said engineered "perhaps the most efficient airline reorganization case on record,” the Wall Street Journal reported today. Robert Keach, an attorney from Maine, made the request in a series of filings on Tuesday in U.S. Bankruptcy Court in Manhattan. Keach recommended paying $371.7 million in fees and $16.3 million in expenses to 47 professional firms, including lawyers, accountants, aircraft consultants and other advisers. A handful of firms who submitted fees after a deadline will be included in separate requests, he said. The final fee and expense tallies cover work completed from the November 2011 inception of former American Airlines parent AMR Corp.'s chapter 11 case through the approval of its bankruptcy-exit plan 23 months later. American Airlines exited bankruptcy through a historic merger with US Airways Group Inc. — initially opposed and later cleared by the Justice Department — that created the world's largest airline. American also used its bankruptcy proceeding to negotiate deep concessions from its main labor unions, ultimately cutting about $1 billion in annual labor costs. Nancy Rapoport, a bankruptcy law professor at University of Nevada at Las Vegas who has served as a fee examiner in large chapter 11 cases, said the appointment of Keach at the beginning of the case was crucial to keeping costs down. "These fees would have been way higher" if Keach hadn't created ground rules governing what could and couldn't be charged, Rapoport said.
Argentina lost a last-ditch bid to delay payments to Paul Singer’s NML Capital Ltd. and other holders of its defaulted bonds, adding to pressure on the South American country to negotiate a deal with the holdouts, Bloomberg News reported yesterday. U.S. District Judge Thomas Griesa had ordered Argentina to pay $1.5 billion to the holders of defaulted debt when it makes the next payment on its restructured debt, due June 30. Judge Griesa yesterday denied Argentina’s request for a stay, which it claims is necessary to allow it to negotiate a resolution with the bondholders. Argentina defaulted on $95 billion of debt in 2001. About 92 percent of creditors agreed to swap the defaulted debt for new bonds in 2005 and 2010, while the rest refused to accept losses of about 70 percent. Argentina has threatened a new default if it’s forced to obey Judge Griesa’s orders, saying that it can’t afford to pay holders of its defaulted and performing debt. Griesa’s decision leaves Argentina with the choice of defying his court orders, defaulting on the debt or striking a deal with the holdouts. If Argentina fails to make the $900 million payment due June 30 to holders of its restructured debt, it has an additional 30-day grace period. http://www.bloomberg.com/news/print/2014-06-26/argentina-bond-fight-jud…
To learn more about the next steps for Argentina and sovereign debt restructuring, be sure to watch James Millstein’s June 20 presentation at ABI’s Cross-Border Symposium: http://news.abi.org/videos
The committee representing equity holders of Genco Shipping and Trading Ltd. began making its case for receiving a larger distribution in the shipping company's chapter 11 restructuring yesterday during the first day of what's expected to be a four-day confirmation trial, Dow Jones Daily Bankruptcy Review reported today. Based on the lowest-end valuation of Genco determined by the equity committee's experts, holders of Genco equity securities should be able to recover nearly $100 million, Steven Bierman of Sidley Austin LLP argued in opening arguments on behalf of the equity committee — made up of Aurelius Capital Partners LP, Och-Ziff Capital Management Group and Mohawk Capital LLC. This estimate stands in contrast to the currently promised warrant recovery for equity holders, a gift valued by Genco at $32.9 million.
Pilgrim's Pride Corp, the second largest U.S. chicken processor, raised its offer for Hillshire Brands Co., escalating a bidding war with Tyson Foods Inc. for the maker of Jimmy Dean sausages, Reuters reported today. Hillshire's shares rose 9 percent at $58.50 in premarket trading, after Pilgrim's Pride said it raised its offer to $55 per share in cash from $45. Tyson Foods, the largest U.S. meat processor, has offered $50 per share in cash. Pilgrim's Pride, which exited bankruptcy in 2009, said that its offer valued Hillshire at $7.7 billion, including debt. Tyson's offer values Hillshire at $6.8 billion, including $500 million in debt.
LightSquared and its creditors, including Dish Network Corp. Chairman Charles Ergen, will go into court-ordered mediation to settle on a plan to restructure the bankrupt wireless venture, Reuters reported yesterday. Bankruptcy Judge Shelley Chapman had given sides until yesterday to forge a consensual plan to get LightSquared out of chapter 11, or else mediate under Bankruptcy Judge Robert Drain. Paul Basta, a lawyer for an independent committee supervising the LightSquared restructuring, said yesterday that the sides had made some progress on a new deal but needed help getting "across the finish line."
Creditors have raised questions about what happened in the final days before Coldwater Creek handed over the keys to its 330-store chain to liquidators in bankruptcy, the Wall Street Journal reported today. Something fueled an unexpected sales boom in the weeks between the April bankruptcy filing and the liquidator takeover in early May. It may be that the retailer's mature and affluent female shoppers flocked to the stores in search of post-bankruptcy bargains, bringing in more cash than Coldwater Creek expected. Or it may be, as creditors suspect, that the company's sales projections were tailored to justify bankruptcy financing that, as it turned out, wasn't needed. "It is not hyperbole to say that [Coldwater Creek] 'gave away the store,' with no legitimate business justification for doing so," creditors' lawyers said in bankruptcy court papers. That is a point the company and lender dispute as Coldwater Creek enters the last stages of its bankruptcy liquidation, which will culminate in confirmation of a chapter 11 plan that establishes the mechanism to pay creditors.
Dish Network Chairman Charles Ergen scored a big win this month in the bankruptcy of wireless venture LightSquared, but the judge who delivered the ruling also had some harsh words for Ergen, and they could come back to haunt the chairman in a separate lawsuit in Nevada, Reuters reported yesterday. Bankruptcy Judge Shelley Chapman nixed LightSquared's proposed chapter 11 exit plan, which would have pushed Ergen behind other creditors. LightSquared had sued Ergen, accusing him of scheming to improperly take control of LightSquared by secretly acquiring its loans. Judge Chapman ruled only a piece of Ergen's debt deserved to be altered, so the restructuring plan was unfair. That should give Ergen leverage in negotiations on a new deal to restructure LightSquared, which is majority owned by Phil Falcone's Harbinger Capital Partners. But Ergen may have a harder time in a Nevada lawsuit, where shareholders claim he breached his fiduciary duty by amassing LightSquared debt on his own behalf, rather than letting Dish make a play for the company. The shareholders are seeking damages from Ergen and other Dish directors, saying the chairman's actions ultimately cost Dish a deal.
