Report: U.S. Corporate Pension Funding Drops in Second Quarter
Reports from Legal & General Investment Management America (LGIMA) and Wilshire Consulting said that the funding ratios for U.S. corporate defined benefit plans fell in the second quarter of 2016, as liabilities rose faster than assets, Pensions & Investments reported yesterday. The funded status of a typical U.S. corporate pension plan declined 3.2 percentage points to 75.6 percent in the three months ended June 30, said LGIMA’s quarterly Pension Fiscal Fitness Monitor. Liabilities for the average plan rose 6 percent over the second quarter. Separately, Wilshire Consulting found that the aggregate funding ratio for U.S. corporate pension plans declined to 76.1 percent as of June 30, down 1.8 percentage points from both March 31 and May 31.
Puerto Rico’s Acosta to Step Down as Head of Development Bank
Puerto Rico Government Development Bank President Melba Acosta will leave the bank at the end of July as President Barack Obama forms a control board to oversee the island’s finances, Bloomberg News reported today. The Government Development Bank has been running out of cash and defaulted in May on $370 million due to bondholders. It has been operating under an emergency period, which allows withdrawals only for public health and safety programs. The bank served for years as overseer of the island’s finances until Governor Alejandro Garcia Padilla in April appointed Victor Suarez, Puerto Rico’s Secretary of State, to serve as the commonwealth’s fiscal agent. Acosta has served as the GDB’s president since October 2014. Garcia Padilla today accepted Acosta’s resignation, whose last day at the bank will be July 31. Obama has until Sept. 15 to create a seven-member control board that will monitor Puerto Rico’s budgets and oversee any restructuring to reduce the island’s $70 billion debt load.
Analysis: What Will Replace Payday Loans Once CFPB Regulations Go into Effect?
While critics say that payday lending often snares vulnerable customers in a cycle of debt, consumer advocates who loathe the industry admit that it does fulfill a need of providing small amounts of cash quickly to people who can't qualify for credit cards or a bank loan, the Associated Press reported yesterday. Roughly 12 million Americans take out a payday loan each year, spending more than $7 billion, according to the Pew Charitable Trusts. But with proposed new regulations from the Consumer Financial Protection Bureau predicted to cut deeply into the industry, experts and consumer advocates are trying to figure out what will replace it. The CFPB's proposal would require payday lenders to determine each customer's ability to repay that loan in the time allotted and would limit the amount of times a customer could renew the loan. Under the proposal, payday loan originations are projected to drop between 59 percent and 80 percent. Nick Bourke, a researcher at Pew who has spent more than five years looking at the payday lending industry, says the industry is already making adjustments in the wake of new regulations. When Colorado effectively banned traditional payday lending, the industry moved into high-cost installment loans that are paid over a few months instead of all upfront in a few weeks. "There will be fewer two-week payday loans because of the CFPB rules, but the industry has already shifted to installment lending that is paid over several months. There will still be high-interest-rate payday loans on the market," Bourke said.
Law Firm Mergers Keep Pace with 2015’s Record
Law firm mergers are keeping pace with last year’s record, with a total of 48 deals announced through the end of June, according to figures from Altman Weil MergerLine, New York Times DealBook blog reported. Most of the activity involved smaller firms, which are increasingly stressed as they compete with others for less work. New York and Florida were notably busy markets for law firm combinations. Overall last year, there were 91 law firm mergers, a number that could be exceeded this year as firms continue to look for ways to flourish, or just to keep afloat. In the second quarter of 2016, 93 percent of the combinations involved firms with fewer than 25 lawyers. Almost half of the acquirers had 50 or fewer lawyers and focused on absorbing firms in the same city or state.
Analysis: Mortgage Crisis Blemishes Set to Clear Off of Many Consumer Credit Reports
Millions of Americans who lost their homes to foreclosures or short sales during the housing crisis seven years ago are getting ready for those blemishes to roll off their credit reports, Bloomberg News reported today. The resulting improvement in credit scores means more Americans will find themselves with the ability and means to once again apply for loans, and not just for home purchases. “Improving credit scores might entice households to start borrowing more in general,” said Ralph McLaughlin, chief economist at real estate search engine Trulia. The impact, though, is hard to quantify because it’s difficult to estimate how many people will once again be emboldened to borrow after experiencing such a shock, said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York. The number of consumers with a new foreclosure added to their credit reports peaked at about 566,000 in the second quarter of 2009, according to data from the Federal Reserve Bank of New York. In the four years through 2010, that group totaled 6.8 million. Negative events such as short sales, when a home is sold for less than what’s owed on it, and foreclosures generally roll off a person’s credit report after seven years, according to the three major providers of consumer credit scores and reports: Experian Plc, Equifax Inc. and TransUnion. With that anniversary fast approaching, better access to credit may be on the way for many. The obvious effect will be in stronger demand for homes, which may also translate into higher spending on durable goods such as appliances and furnishings, said Oubina.
Now Available for Pre-Order in the ABI Bookstore: How Secure Are You? Secured Creditors in Commercial and Consumer Bankruptcies
ABI's newest title, How Secure Are You? Secured Creditors in Commercial and Consumer Bankruptcies, provides practitioners with in-depth analysis of the most common concerns in secured claims disputes, including citations to important case law. This indispensable guide, written by members of ABI’s Secured Credit Committee, is a must-read for anyone whose work involves secured creditor claims. The new book is available for pre-order in the ABI Bookstore (be sure to log in to obtain the ABI member price!).
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New on ABI’s Bankruptcy Blog Exchange: Court Approves Key Employee Incentive Plan, Finding It Is Not a Disguised Retention Plan
Key Employee Retention Plans (KERPs) and Key Employee Incentive Plans (KEIPs) are often the subject of intense interest, either because a distressed company’s management is focused on developing such programs to retain valuable talent during a time of great uncertainty within its organization or because certain creditor constituencies or parties in interest take issue with the payments a debtor intends to make under the programs. The debtor’s experience in In re American Eagle Energy Corporation was no different, according to a recent blog post. There, the U.S. Trustee and a secured creditor objected to the debtor’s proposed KEIP, arguing that it was a disguised, prohibited KERP. The U.S. Bankruptcy Court for the District of Colorado, however, found otherwise and approved the plan.
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