Loan programs orchestrated by Dewey & LeBoeuf to help incoming partners cover capital contributions are sparking more litigation, with a former Dewey partner claiming in a lawsuit filed in federal district court yesterday that Barclays Bank and the now-defunct firm entered into a $540,000 loan agreement in his name without his permission, the Am Law Daily reported today. Entertainment lawyer L. Londell McMillan says in the suit that he initiated the action after being contacted in December by Barclays, which demanded repayment of money he says he never borrowed from the bank. McMillan says in his 13-page complaint that the suit is designed "to challenge a fraudulent scheme orchestrated and arranged" by Barclays and Dewey management. Dewey is not named as a defendant.
Bankruptcy Judge Martin Glenn yesterday approved the outline of a plan by liquidators and creditors of failed brokerage MF Global to repay the company's creditors, a key step toward ending its $40 billion chapter 11 case, Reuters reported yesterday. The approved outline was amended to address minor concerns that Judge Glenn had raised in refusing to approve an earlier version of the outline last week. Under the payout plan, the company's trader customers would be repaid in full. Louis Freeh, the trustee liquidating the MF Global parent, has agreed if necessary to support an effort by customers' trustee James Giddens to allocate some of the parent's assets to customer accounts to ensure their full recovery.
Lehman Brothers Holdings Inc. set its third payment to creditors for April 4 after getting a judge’s approval to abandon a previously fixed schedule for returning money, Bloomberg News reported yesterday. The record date for the latest payment to holders of claims against the defunct investment bank is Feb. 23, Lehman said in a court filing on Feb. 15. It did not say how much it would pay out. Lehman, which is still liquidating and trying to cut claims after exiting bankruptcy court protection last year, has so far paid creditors about 9 cents on the dollar, or half of what it expects to pay by about 2016. It said in December that it raised $3.9 billion for creditors in the quarter ended Sept. 30 and another $1.6 billion in October and November, while its $6.5 billion sale of apartment owner Archstone was due to close by March 26.
U.S. power company Energy Future Holdings, formerly TXU Corp., said that it could go into bankruptcy, liquidation or insolvency if lenders or noteholders accelerated repayment of all borrowings, Reuters reported today. "If lenders or noteholders accelerate the repayment of all borrowings, we would likely not have sufficient assets and funds to repay those borrowings," Energy Future Holdings said under the risk factors section of a regulatory filing today. The company in January extended the maturity date of a $16.5 billion term loan to 2017 from 2014. It has also exchanged debt on which it owed cash payments for debt on which interest payments could be deferred.
Energy Future Holdings has enough money to pay its debts for at least the next year, but lawyers and bankers are betting that a big chunk of the Texas power company will file for bankruptcy, and are already trying to line up clients to represent in the event of a restructuring, Reuters reported today. Energy Future—formerly TXU—set the wheels in motion last week when it tapped restructuring advisers from law firm Kirkland & Ellis and financial advisers Evercore Partners and the Blackstone Group. The hiring of advisers comes just months before the company, which was taken private in 2007 in the largest leveraged buyout, must start making payments on some of the $52 billion of debt it had as of the end of September. Now, creditors have begun to organize themselves for a restructuring and a plethora of large law firms are involved or making pitches to represent creditor groups, including Cadwalader Wickersham & Taft, Brown Rudnick, Otterbourg Steindler Houston & Rosen, and White & Case.
Thanks to record North American profits, the Detroit automakers plan to hand out checks totaling more than $750 million to about 122,000 workers, Bloomberg News reported yesterday. In Michigan alone, the checks will contribute $350 million to the economy and generate 3,500 jobs, said Donald Grimes, a senior research specialist at the University of Michigan, who studies labor and the economy. GM earned $5.48 billion in North America in the first nine months of last year and may have made $1.17 billion before interest and taxes in the fourth quarter, the average of four analysts' estimates. That would suggest a profit-sharing payment of $6,600. While that would be shy of the record, it is a sizeable sum given U.S. auto sales were 15 percent below 1999 levels, Dziczek said.
Schmidt's Bakery and Delicatessen filed for chapter 7 bankruptcy, listing just over $44,000 in assets against more than $814,000 in liabilities that include tax deficiencies for state sales and wage withholding taxes, and $190,000 in federal payroll tax withholdings that the Internal Revenue Service said it never received, the Denver Post reported yesterday. The Loveland, Colo.-based bakery and delicatessen was seized by Colorado tax agents on the morning of Jan. 8. The court filing lists 102 creditors, including 40 employees.
Hostess Brands Inc. won bankruptcy court approval to hold auctions for brands including Wonder Bread, Twinkies and Drake's, Bloomberg News reported yesterday. Bankruptcy Judge Robert Drain yesterday approved Flowers Foods Inc., McKee Foods Corp., United States Bakery Inc., Apollo Global Management LLC and C. Dean Metropoulos & Co. as stalking-horse bidders for most of Hostess' cake and bread brands, setting the thresholds other suitors will have to exceed. A sale hearing, to approve the highest and best bids, is set for March 19.
An expected merger agreement this week between AMR Corp.'s American Airlines and US Airways Group Inc. could end the latest chapter on airline consolidation that has helped to stabilize an industry troubled for decades, the Wall Street Journal reported today. The $10 billion-plus deal would follow three other industry megamergers since 2008, a period of consolidation that has produced a healthier industry with the prospects of sustainable profitability and investment-grade credit ratings. Travelers would have fewer airline choices—an AMR-US Airways merger would leave four airlines controlling about 83 percent of domestic seats—but also potentially reap the benefits from greater reliability and higher investment in the airlines. Competition remains intense as discount carriers account for roughly 37 percent of domestic passenger air trips, keeping a lid on price increases. On an inflation-adjusted basis, domestic fares are about 15 percent lower than they were in 2000, according to government data.
While the Twinkie's demise nearly came about at the hands of corporate America's machinations, its survival depended on a bankruptcy liquidation that made the 83-year-old brand salvageable, according to a New York Times DealBook analysis yesterday. Its first owner, Continental Baking Company, bought companies left and right in the 1920s, including the Taggart Baking Company, maker of Wonder bread, in 1925. Continental Baking continued its acquisition spree and by 1968 it was a motley assortment of baking brands that fed on America's tastes for sweet and easy food. It was then acquired by Harold Geneen's ITT, a conglomerate that sold not only Twinkies but also munitions. There, the brand sat for 16 years until Continental Baking was sold in 1984 for $475 million to Ralston Purina. By then the baking business had entered a slow growth phase as inflation in baked goods, which had allowed the company continually to raise prices, subsided. Ralston Purina was unable to produce growth in the brands and ended up selling the bakery for about $400 million in 1995 to Interstate Bakeries. Interstate Bakeries was itself a mongrel of many brands put together by serial acquisitions. The company entered bankruptcy in 2004. More than four years later, it emerged, now owned by Ripplewood, which put up $130 million to acquire it. It was then that the company rebranded itself as Hostess Brands. Despite the company's cost cuts, and its reductions in employee headcount by about 10,000, that was still not enough to stave off bankruptcy. Hostess in 2012 filed a plan to liquidate the company and fire almost all its 18,000 employees. Instead of trying to work out a compromise by reorganizing in bankruptcy, the company used the bankruptcy process to escape all its past burdensome debts.
