ABI Blog Exchange

I want to take up Michelle Harner's call for "innovation and new approaches to valuation". Valuation may well be the most important issue in bankruptcy, and it is also the issue that is least subject to meaningful judicial review. Imagine a Court of Appeals trying to parse through discounted cash flow models or what are proper comparables. The lack of meaningful appellate review makes it all the more important that we get valuation right.  Our current valuation system is fundamentally adversarial.  Both sides put up evidence in the form of valuation compurgators experts, and the court then has to decide on a valuation, which need not be either of the experts'. The use of expert witnesses always has problems--the expert is employed by a litigant, which creates a concern about expert objectivity.  (I say this as someone who sometimes serves as an expert witness.) The normal solution in our litigation system is to have experts are paid for their time, not their opinions (which are their own) or the results in the case.

Read More from: Credit Slips

5 hours 38 min ago
I have had bankruptcy clients who have been overly concerned with their credit score before, during, and after they have filed for bankruptcy. The credit industry, including the credit bureaus and the credit protectors, have done a great job of marketing to Americans the importance of having a good credit score. What they fail to+ Read More The post There Is Way Too Much Emphasis On A Credit Score appeared first on David M. Siegel.
11 hours 28 min ago
In section IV.E of its report and recommendations of reforms to chapter 11 of the Bankruptcy Code, the American Bankruptcy Institute Commission to Study the Reform of Chapter 11 (the “Commission”) considered changes to the Bankruptcy Code’s “safe harbor” provisions. Generally, the filing of a bankruptcy case immediately triggers the application of the automatic stay and other protections that prohibit collection efforts and the enforcement of contractual rights against the debtor, including contractual rights of termination. The Bankruptcy Code’s safe harbor provisions exempt (as their colloquial name implies) certain financial and derivatives contracts from sections 362 and 365(e)(1), which, respectively, impose the automatic stay and prohibit the enforcement of ipso facto clauses – i.e., a contractual clause that is triggered upon the debtor’s bankruptcy filing – to the extent those sections would prevent certain counterparties from exercising certain contractual rights to terminate, liquidate or accelerate safe harbored contracts.
11 hours 28 min ago
Join us for Episode 20 of Accredited Investor Markets Radio, a discussion with Ron Miller of StartEngine. Host and Managing Editor of AccreditedInvestorMarkets.com, Alicia Purdy, chats with Ron about why unaccredited investors could be a boon, rather than a threat, to crowdfunding. Ron also weighs in on the effects unaccredited investors can have in the startup space, how an accredited investor can best navigate this new territory and what StartEngine has been working on, including growing an equity crowdfunding platform.   You can find out more about crowdfunding and equity crowdfunding by visiting www.aimkts.com   You can learn more about Ron Miller and StartEngine here.   He can also be found here: Ron Miller Twitter: @ronstartengine StartEngine Twitter: @StartEngineLA Ron Miller: LinkedIn StartEngine : LinkedIn   About Ron Miller:
11 hours 31 min ago
Kicking the can down the road doesn’t seem to work for many distressed companies. The percentage of repeat defaulters since the Great Recession is running at more than double the historical average. That suggests that lax credit markets allowed troubled companies to paper over their problems without fixing them, according to a report Thursday by Moody’s Investors Service.

Read More from: WSJ.com: Bankruptcy Beat

11 hours 39 min ago
Kicking the can down the road doesn’t seem to work for many distressed companies. The percentage of repeat defaulters since the Great Recession is running at more than double the historical average. That suggests that lax credit markets allowed troubled companies to paper over their problems without fixing them, according to a report Thursday by Moody’s Investors Service.

Read More from: WSJ.com: Bankruptcy Beat

11 hours 39 min ago
Much is being made of American Airlines' "bold" decision to avoid hedging its fuel costs. I fully believe that corporations engage in way too much hedging, mostly to the benefit of big financial institutions. But let's be clear, a just out of bankruptcy counterparty is not going to be doing a lot of swaps deals anyway.

Read More from: Credit Slips

12 hours 18 min ago
Emanuel Grillo has joined the bankruptcy and workouts group at Baker Botts. Mr. Grillo, who will be a partner at the firm, has represented creditors, debtors and trustees in restructurings. He has worked on such bankruptcy cases as Lehman Brothers Holdings Inc., Delphi Corp. and Silicon Graphics Inc. Most recently, Mr. Grillo was a partner with Goodwin Procter. He is a member of the American Bankruptcy Institute and the Turnaround Management Association. Marc S. Kirschner has joined Goldin Associates as senior managing director and member of the management committee. He has been an adviser and trustee in bankruptcy matters and has worked with companies like Tribune Co., Yellowstone Mountain Club and Refco. Mr. Kirschner is a fellow of the American College of Bankruptcy.

Read More from: WSJ.com: Bankruptcy Beat

12 hours 33 min ago
Emanuel Grillo has joined the bankruptcy and workouts group at Baker Botts. Mr. Grillo, who will be a partner at the firm, has represented creditors, debtors and trustees in restructurings. He has worked on such bankruptcy cases as Lehman Brothers Holdings Inc., Delphi Corp. and Silicon Graphics Inc. Most recently, Mr. Grillo was a partner with Goodwin Procter. He is a member of the American Bankruptcy Institute and the Turnaround Management Association. Marc S. Kirschner has joined Goldin Associates as senior managing director and member of the management committee. He has been an adviser and trustee in bankruptcy matters and has worked with companies like Tribune Co., Yellowstone Mountain Club and Refco. Mr. Kirschner is a fellow of the American College of Bankruptcy.

Read More from: WSJ.com: Bankruptcy Beat

12 hours 33 min ago
What you did last year may come back to bite your family  when you file bankruptcy. Even if not fatal, the bite can  leave scars. I sat waiting for my turn at a bankruptcy hearing last week and watched a series of other cases that left blood in the water. The trustee’s feeding frenzy in at least three cases centered on payments or transfers the debtor  made to family before they filed their bankruptcy case. In some cases, the debtor was repaying money lent by family.  In others, it appeared the debtor had simply made a gift to family. In the worst case, it looked like the debtor had transferred a car to keep it out of the bankruptcy. All of those transfers spelled trouble. In each case I watched, the Chapter 7 trustee continued the hearing for the production of documents, the amendment of schedules, or further questioning. In several, she wanted the debtor to agree to give her a longer period to challenge their very right to a bankruptcy discharge. None of this bodes well for the debtor. Here’s why. The long arm of the law Bankruptcy law gives the trustee legal rights to recover, for the benefit of creditors, property or money the debtor has transferred.  Collectively, those are the avoiding powers.
13 hours 4 min ago
Adding to the apparent deluge of issues surrounding the Eleventh’s Circuit decision in Crawford v. LVNV Funding, LLC, the Bankruptcy Court for the Northern District of Indiana has sanctioned two creditors for not being able to do math.  More accurately, the Sekema court awarded sanctions of $1000 for no-showing a show-cause hearing to explain why filing a time-barred claim did not violate Rule 9011.  The underlying debts were subject to Indiana’s six-year statute of limitations.  The debtors successfully objected to the claim on that basis, and the Court issued a Show Cause Order on its own initiative (“By filing that claim, it appears that [creditors] violated Rule 9011(b)(2) of the Federal Rules of Bankruptcy Procedure because the claim was not warranted by existing law or a non-frivolous argument for its extension and a reasonable pre-filing inquiry would have revealed that lack of merit.  See In re Excello Press, Inc., 967 F.2d 1109, 1112-13 (7th Cir. 1992) (Rule 11 requires the filer to investigate any obvious affirmative defenses)”).  The creditors failed to appear and the Sekema court took the matter under submission.

Read More from: Creditors' Sidebar

13 hours 46 min ago
Regina StangoKelbon Michael DeBaecke Jonathan Cooper The following is a summary of a paper prepared for the American Bar Association and later submitted to the Pennsylvania Bar Institute. The full article can be found at the link below. In recent years, companies in financial distress have found “independent” directors to be useful to achieve protections for their board members. An independent director is a director – usually with no prior affiliation to the company – who has no personal interest or relationship that would render him or her incapable of acting solely in the best interests of the business. These individuals, typically selected on the basis of their business acumen and/or restructuring experience, bring not only expertise, but a desirable level of impartiality and objectivity to the corporate management scheme. The appointment of an independent director can benefit a company in a number of ways, particularly when the business is struggling. From a practical standpoint, independent directors may be used for investigative purposes or to negotiate transactions involving insiders. The role of the independent director can mirror that of a bankruptcy examiner, a chief restructuring officer, or both, depending on the circumstances and strategic purposes.

Read More from: Bankruptcy Law Watch

13 hours 55 min ago
“With Great Risk Comes Great Reward” – T. Jefferson In order to succeed as a business person in this country individuals have to be willing to take a risk.  They put their heart, soles and wallets on the line.  However, not every business can succeed.  Even among those businesses that do succeed, there are often major hiccups in the owners personal finances along the way.  When a business owner files for personal bankruptcy they face special headaches that non-business owners don’t face. Pay Stubs When an employee of a company files personal bankruptcy, the trustee requests pay stubs, bank statements, tax returns and other financial documents.  These documents are usually pretty straight forward with the information the trustee is seeking right there for all to see.  However, business owners don’t typically receive pay stubs.  Even if a business owner chooses to receive a regular paycheck, the stubs are not telling the whole story.  They may also receive bonuses, profit sharing or simply draws that may not appear on the owners pay checks.  The owner’s income is often a complicated target that is hard to find and even more difficult to explain to a trustee who may never have run a business of their own. Valuation
14 hours 33 min ago
It’s a new year, and The Examiners are back and are talking about the always-contentious issue of bankruptcy fees. Massive bankruptcy cases, like those of Lehman Brothers and Energy Future Holdings—and now, the already-complicated Caesars Entertainment Corp.—tend to feature armies of professionals to deal with the complexities of the case, albeit at a high cost.

Read More from: WSJ.com: Bankruptcy Beat

14 hours 49 min ago
It’s a new year, and The Examiners are back and are talking about the always-contentious issue of bankruptcy fees. Massive bankruptcy cases, like those of Lehman Brothers and Energy Future Holdings—and now, the already-complicated Caesars Entertainment Corp.—tend to feature armies of professionals to deal with the complexities of the case, albeit at a high cost.

Read More from: WSJ.com: Bankruptcy Beat

14 hours 49 min ago
If financial firms are serious about incorporating gender and ethnic diversity into their leadership teams, they need to encourage women to apply for promotions and implement more flexible work schedules.

Read More from: BankThink

14 hours 49 min ago
Authored by J. Ellsworth Summers, Jr. and Scott St. Amand and J. Ellsworth Summers, Jr. and Scott St. Amand of Rogers TowersOn Monday, December 8, 2014, the American Bankruptcy Institute’s Chapter 11 Reform Commission, which is tasked with recommending reforms to the nearly 40-year-old bankruptcy regime, released a report which found that the current Chapter 11 system has fallen behind the times.  The Commission’s report urges Congress to provide troubled businesses with a better chance at rebuilding through Chapter 11. The report is three years in the making, and is in direct response to practitioners’ and lawmakers’ observations that the Chapter 11 system has not kept pace with changing financial trends and modern finance, which leaves struggling businesses with diminished opportunities to reorganize.  Of the nearly two hundred and forty recommendations, many seek to streamline the Chapter 11 process, making the reorganization process cheaper, fairer and more effective.

Read More from: Florida Banking Law Blog

15 hours 59 min ago
This Dec. 27, 2013, photo shows the exterior of Caesars Atlantic City in Atlantic City N.J.
Associated Press
A federal bankruptcy judge dispensed harsh words for Caesars Entertainment Corp. and its private-equity owners Wednesday, marking the second time this month a federal judge has called into question financial maneuvers the owners made before putting the casino company’s largest unit into bankruptcy. The Wall Street Journal has the Daily Bankruptcy Review article here. (Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”)

Read More from: WSJ.com: Bankruptcy Beat

16 hours 23 min ago

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