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Republicans Explore Budget Maneuver to Chip Away at Dodd-Frank

Some Republican senators are looking to put financial deregulation on the fast track next year by using a special legislative procedure to help them dismantle parts of Dodd-Frank, the Wall Street Journal reported today. They are exploring use of a tactic known as reconciliation, a procedural shortcut tied to the budget, which would allow them to make legislative changes to the 2010 regulatory-overhaul law with just a simple majority in the Senate. Republicans are likely to hold 52 seats in the 100-seat chamber, meaning they could pass such changes with just GOP votes. They would otherwise need 60 votes to get the legislation through the Senate, putting them in the difficult position of needing support from some Democrats, who generally oppose rolling back the landmark law. Sen. Pat Toomey (R-Pa.) is leading the charge to use reconciliation to pare back pieces of the law, which President-elect Donald Trump has repeatedly said that he wanted to scale back or scrap.

Fed to Meet on Finalizing Major Too-Big-to-Fail Rule Before Obama Leaves

The Federal Reserve announced on Wednesday that it would meet next week to consider finalizing a major rule aimed at ensuring that big banks can fail without requiring bailouts or threatening the financial system, one of the major pieces of the post-crisis rules yet to be finished, the Washington Examiner reported yesterday. The agency will meet on Dec. 15 to consider the rule, which would require banks to issue certain amounts of long-term debt that could be converted to equity in the case of a bank failure, effectively forcing creditors to "bail in" the bank rather than taxpayers bailing it out. The finalization would come just a month before President-elect Trump takes office, despite congressional Republicans' warnings to financial regulators not to rush rules out the door before President Obama's term ends. The rule in question was proposed in October 2015 and would apply to the eight U.S. banks that have been identified as potential threats to the financial system if they were to fail. Those banks would be required to issue debt of maturity greater than one year at the bank holding company level — the highest level of corporate organization. The banks would have to maintain a minimum of capital and that long-term debt equal to 18 percent of their assets, or 18 percent "loss-absorbing capacity," as regulators call it.

Commentary: Fitch Signs Off on Chicago School Bonds, but Raises Bankruptcy Specter

Chicago Public Schools' latest bond issue got a green light from one of Wall Street's rating agencies today, but with an asterisk the size of Mt. Rushmore, according to a Crain’s Chicago Business commentary today. Fitch Ratings said that it gave an “A” rating to a $500 million CPS offering because the issue has a dedicated revenue source — a $45 million property tax hike recently approved by the City Council — that's legally "insulated" from a possible CPS "bankruptcy.” The agency used the word bankruptcy in its statement, something CPS chief Forrest Claypool has sworn is not coming but that the district alluded to itself in bond documents earlier this week as a "hypothetical" possibility. Despite denials from Claypool and Mayor Rahm Emanuel that bankruptcy is on the way, even a passing reference ought to raise some eyebrows, according to the commentary. Illinois Gov. Bruce Rauner (R) has from time to time urged bankruptcy as a solution to CPS' woes, suggesting that such a step would allow the district to restructure its contract with the Chicago Teachers Union.

OPEC Deal Raises Hopes But Not Valuations for Troubled Oil Producers

OPEC’s deal to cut oil production isn’t likely to save investors in troubled U.S. producers from seeing their stakes vanish in chapter 11, according to restructuring experts, the Wall Street Journal reported today. A surprise move by the Organization of the Petroleum Exporting Countries to cut crude production by 1.2 million barrels a day, or more than 1 percent of global output, has energy companies and their investors cheering. But lawyers and advisers say that crude’s recent price rally, and the expectation it will continue in 2017, may have come too late for distressed oil and gas outfits that are already in chapter 11, or poised to file for bankruptcy with restructuring deals that were months in the making. “You need a lot more of this to repair the cumulative impact of low oil prices,” said Steve Strom, chief executive of investment bank Blackhill Partners. Energy XXI Ltd., an oil and gas explorer on the cusp of exiting chapter 11, shows why. The Houston company sought bankruptcy protection in April with a $3.6 billion debt load and recently reached a restructuring deal with top creditors. The restructuring plan, which a bankruptcy judge must confirm, was inked in mid-November, two weeks before the OPEC agreement. While the success of the production-cutting accord still depends on several variables, it raised hopes that oil prices could see a sustained rally above $50 a barrel next year as a brutal two-year supply glut dissipates. But those hopes appear unlikely to upset Energy XXI’s exit proposal, which values its business at around $600 million. Read more. (Subscription required.) 

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Judge: Receiver Can Keep Control of Lodge on the Desert for Now

Bankruptcy Judge Brenda Moody Whinery ruled yesterday that the historic Lodge on the Desert will remain under control of a receiver appointed by a state court, at least until continuation of the hotel’s chapter 11 bankruptcy case is decided in January, the Arizona Daily Star reported today. In late November, hotel owner Lodge Partners filed its second chapter 11 bankruptcy in three years, saying that it had arranged a short-term loan and longer-term financing to successfully reorganize the business. The company had defaulted on payments required under a chapter 11 bankruptcy case filed in 2013 and closed last year. The hotel’s major secured creditor, Palatine Tucson LLC, filed a foreclosure action and prompted a state court to appoint a receiver for the hotel in early November. A foreclosure sale of the hotel was scheduled for Jan. 5.

50 Cent Wins Big Settlement That Will Help Pay Debts From Bankruptcy

Hip hop star 50 Cent has won a $14.5 million settlement against the lawyers who represented him in a deal with a headphone company that helped propel him into bankruptcy in July 2015, the Hartford Courant reported today. The failed deal with Sleek Audio resulted in an $18.4 million settlement against 50 Cent, whose real name is Curtis James Jackson III. Sleek Audio was Jackson's largest creditor in his chapter 11 petition and ultimately settled for $17.5 million. Jackson's bankruptcy reorganization was approved this summer. Any settlement from the law firm Garvey Schubert Barer was factored into 50 Cent's reorganization plan and the bulk of the $14.5 million, or $13.649 million, will go to creditors. The rest will go to the lawyers who represented Jackson in the claim against the law firm. Jackson has a date in U.S. Bankruptcy Court Dec. 15, where he'll seek Judge Ann M. Nevins’ approval of the settlement.