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Large Pension Fund Files Plan to Cut Retiree Benefits under New Law

Nearly 300,000 former truckers and their families would suffer significant losses under a proposal that uses a controversial new law to cut once sacrosanct pension benefits, The Washington Post reported yesterday. The Central States Pension Fund, which administers retirement benefits for some former and current Teamster truckers, said that the reductions are the only way to save the plan from insolvency. Under the proposal, pensions for Central States’ 407,000 participants would be cut by an average of nearly 23 percent — but the pain would be distributed unevenly and some participants would not be subject to reductions. Older retirees would generally receive smaller cuts, while those who worked for defunct companies that did not keep pace with their pension funding obligations would face steeper reductions. The proposed cuts were detailed in a plan submitted to the Treasury Department late last month. The Treasury has 225 days to evaluate the plan.

American Apparel Won’t Abandon U.S. Manufacturing in Bankruptcy

American Apparel has no plan to abandon its commitment to U.S.-based manufacturing of its clothing line as part of its turnaround effort, The Wall Street Journal reported yesterday. At the clothing retailer’s debut hearing in its chapter 11 case, its attorney outlined the company’s turnaround plan, which has the support of senior lenders. American Apparel is getting fresh cash to revamp its business, and creditors will get equity in the reorganized company. The turnaround won’t mean widespread closings of American Apparel’s chain of more than 230 stores and will stand by its pledge to produce its clothing line in the U.S. The assurance came in response to remarks from Judge Brendan Linehan Shannon, who will preside over American Apparel’s chapter 11 restructuring. American Apparel returns to bankruptcy court in November for continued action on its turnaround effort.

Patriot Coal Delays Bankruptcy Plan Hearing for Creditor Talks

Patriot Coal Corp. continued to negotiate with creditors on Tuesday and postponed a key bankruptcy court hearing until Wednesday to try to reach a deal to end its chapter 11, Reuters reported yesterday. Patriot's lead attorney told Judge Keith L. Phillips that he had reached agreement with all but one key objector to Patriot's chapter 11 plan and was confident an agreement with all the creditors could be reached. The hearing was scheduled to resume at 11:30 a.m ET Wednesday. West Virginia-based Patriot Coal has said that it is running low on cash and needed court approval for its reorganization plan to avoid a liquidation. The plan is centered on selling the bulk of its mines and coal reserves to privately held Blackhawk Mining of Lexington, Ky. Creditors have objected and one group of lenders asked the court to convert the bankruptcy to a chapter 7 liquidation, which could mean shutting down the business and selling it piecemeal.
In related news, Patriot Coal Corp. has issued a new Worker Adjustment and Retraining Notification (WARN) Act notice to its employees, Reuters reported yesterday. Patriot Coal expects to lay off more than 2,000 workers in West Virginia and the notice from Patriot Coal extended the period from the original WARN notice issued on Aug. 3, 2015, because of a delay in Patriot's bankruptcy case. The company has also asked the judge to allow it to reject its collective bargaining agreement with the United Mine Workers of America, which has been negotiating with Blackhawk to maintain some benefits. The case is Patriot Coal Corp., U.S. Bankruptcy Court, Eastern District of Virginia, No. 15-32450. Read more.

Bankruptcy Filing Isn't Allowed for Marijuana Businesses — So Now What?

Frank Arenas operates a marijuana wholesaler — legal under Colorado law — and is fighting the dismissal of his and his wife's chapter 7 filing in the U.S. Bankruptcy Court for the District of Colorado, reported on Monday. It is a result that even Judge Howard R. Tallman has called "devastating" for the couple in his order throwing it out. Since bankruptcy is a federal process, judges have ruled that the violation of the federal Controlled Substances Act by distributing marijuana makes cannabis-related companies ineligible for bankruptcy. In the Arenases' case, a trio of bankruptcy justices have underscored the point, asserting in an Aug. 21 opinion that "possessing, growing and dispensing marijuana and assisting others to do that are federal offenses…. Can a debtor in the marijuana business obtain relief in the federal bankruptcy court? No." Last month, the appellate panel judges agreed to stay the dismissal of the Arenases' case while the couple appeals the decision to the Tenth Circuit Court of Appeals, making it the first time that this debate will be considered at so high of a judicial level.
In related news, in ABI's latest podcast, ABI Executive Director Sam Gerdano talks with Prof. Michael Sousa of the University of Denver Sturm College of Law about the intersection of the pot business and federal law. Sousa examines cases and circumstances surrounding a financially distressed marijuana business in light of pot being an illegal substance under the Controlled Substances Act of 1970. Click here to listen.
Also, this year's Winter Leadership Conference (Dec. 3-5, 2015, at the Arizona Biltmore in Phoenix) features a session titled "Selling Unusual Assets in Bankruptcy and Their Tax Aspects (Pot, Porn and Puppies)." Click here for more info and to register.





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