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Bankruptcy Headlines

Judge Tosses Hedge Fund’s Lawsuit Against Neiman Marcus

A Texas judge Tuesday dismissed a bondholder lawsuit against Neiman Marcus Group over the company’s transfer of its MyTheresa e-commerce business beyond the reach of bondholders, WSJPro reported. Judge Tonya Parker of Dallas County District Court dismissed a lawsuit filed in December by Marble Ridge Capital LP that alleged that the company’s transfer of its MyTheresa e-commerce business was a fraudulent transaction. Judge Parker cited the lack of “subject matter jurisdiction” for the ruling, meaning Marble Ridge doesn’t have standing to bring the lawsuit. The verdict removes one hurdle to Neiman Marcus’s ongoing debt-restructuring talks with bondholders and lenders. The department store chain is in talks with its creditors to extend the maturity of $4.7 billion in debt to 2023. Those talks didn’t include Marble Ridge. MyTheresa is a fast-growing Munich-based online business that caters to customers in Europe, Asia and the Middle East. In September, Neiman Marcus transferred ownership of MyTheresa to its parent company, which weakened bondholders’ claims on the business.

High-Yield Muni Market Passes a Key Test from Puerto Rico’s Sell-Off

Over the past month, hedge funds and other investors dumped more than $2.5 billion of debt they received in Puerto Rico’s record restructuring, a sell-off that made the sales-tax-backed securities the most actively traded in the municipal-debt market, Bloomberg reported. Yet the prices haven’t crashed — and the flood did little, if anything, to dampen the gains for other tax-exempt junk bonds. The performance shows that the $3.8 trillion municipal market weathered a major test from Puerto Rico’s bankruptcy. The debt restructuring had raised concern that the speculative corner of the market would struggle to absorb the billions of dollars of new debt, pushing up yields on Puerto Rico’s new securities and other high-risk debt competing for limited space in investors’ portfolios. The new batch of restructured debt hit the secondary market in February after Puerto Rico issued $12 billion of non-rated sales-tax bonds, called Cofinas, to investors who traded in their outstanding securities, cutting more than $5 billion of the island’s troubled debt. Since then, high-yield municipals have earned 1.2 percent, more than the 0.8 percent advance in the broader tax-exempt market, according to Bloomberg Barclays indexes.

Bondholders Accuse LBI, HPS of Insider Trading in Debt

Bondholders say Spanish-language broadcaster LBI Media Inc.’s bankruptcy-exit plan is a product of insider trading and fraud, a violation of the rules of engagement in a market where aggressive trades are the norm, WSJPro reported. LBI denies the allegations, as does HPS Investment Partners, the fund that is poised to take over the broadcaster, which runs radio and TV operations in most of the country’s major Spanish-language markets. The claims from bondholders led by Caspian Capital LP and York Credit Opportunities Fund LP appeared in a court filing Monday. They will be tested in a confrontation next week in the U.S. Bankruptcy Court in Wilmington, Del., where LBI filed for bankruptcy protection in November. Privately held LBI is owned by the family of Chief Executive Lenard Liberman, but its debt securities trade in the public market. Bondholders say that means the normal securities-trading rules apply, and the company broke the rules by allegedly providing inside information to HPS. LBI says it needed rescue financing and followed standard market practices to get it from HPS. There was no insider trading, HPS’s lawyers have said, and the LBI deal was typical in a market where players are sophisticated hedge funds.

Bitcoin Is in the Dumps, Spreading Gloom Over Crypto World

Bitcoin is in the longest slump of its 10-year history, which is forcing even its most ardent supporters to shelve dreams of global disruption and focus on simply tightening their belts, The Wall Street Journal reported. Signs of the crypto winter are everywhere, marking a sharp reversal since the manic highs of 2017. The price of bitcoin Tuesday was just below $4,000, down about 80 percent from a trading peak of about $19,800 in December 2017. The total market value of all cryptocurrencies outstanding is down 85 percent from its peak in January 2018. Volumes on the largest U.S. exchanges have also been falling steadily for the past 15 months, according to research firm TradeBlock. Cryptocurrencies have struggled to attract mainstream institutional investors. Regulation is still unclear, which has scared off some potential users. Companies that have sprung up are under pressure until the next upswing, and crypto fans aren’t sure where that will come from or when. While bitcoin is trading well above its December 2016 level, the severity of the recent drop is raising concerns that it may never recover. The market’s long-term viability now hinges on the development of tangible uses for bitcoin and its underlying blockchain technology. The sharp decline in price has led to cost-cutting at some firms. Firms that raised capital and made money during the boom are taking advantage of the slump, scooping up smaller companies. Revenue for bitcoin miners, who get paid in newly created bitcoin in exchange for processing transactions, has also fallen over the past 15 months.

Wall Street Is Betting the Fed’s Rate-Raising Days Are Done for Now

Just three months ago, investors were in a panic over the idea that the Federal Reserve might push borrowing costs too high and tip the U.S. economy into a recession, The New York Times reported. Now, Wall Street is toying with the idea that the central bank could actually be cutting interest rates by the end of the year. Those forecasts are evident in the market for interest rate futures, where the odds of another interest rate increase in 2019 have fallen to zero, from about 30 percent in December, while the chance of a decrease in rates has risen to more than one in five. One reason for the changing forecasts? The Fed’s own signal to be more patient as it evaluates whether or not to keep raising interest rates. Since the central bank’s chairman, Jerome H. Powell, first spoke about this newfound patience, stocks have soared more than 15 percent. The Fed could add more fuel to this rally on Wednesday, when the central bank concludes its latest monetary policy meeting. It is expected leave interest rates untouched and further emphasize that it is in no hurry to lift them. The central bank isn’t the only reason that the market is up. Some analysts point toward rising hopes for a U.S.-China trade deal as helping to lift important technology and industrial shares. However, sectors sensitive to interest rates — small companies for which borrowing costs make up a significant cost, and homebuilders and carmakers whose customers depend on financing — have posted some of the bigger gains in this rally. Those increases have come even as forecasts for economic growth have shown concern about a slowdown. Economists expect that the U.S. grew at an annualized pace of less than 2 percent in the first quarter, a slowdown from the 3 percent growth posted in 2018.

The Lawyers Who Took on Big Tobacco Are Aiming at Realtors and Their 6% Fee

A new class-action lawsuit takes aim at real estate agents and the tools they use to do business, and housing industry watchers say it could revolutionize the way Americans buy and sell the biggest asset they’ll ever own, MarketWatch reported. The suit was filed in Chicago on behalf of anyone who sold a home through one of 20 of the largest listing services over the past five years. It charges that the National Association of Realtors (NAR), as well as the four largest national real estate brokerages, and the Multiple Listing Services (MLSs) they use, have conspired to require anyone selling a home to pay the commission of the broker representing their buyer “at an inflated amount,” in violation of federal antitrust law. Homeowners who are ready to sell their properties usually hire a real-estate agent to represent them. Sellers agree to pay that person a commission on the selling price of the home, which has traditionally been known as the “6%,” but it’s a little more complicated than that. Sellers can really only negotiate with the agent they’ve hired, while agents representing buyers are generally assured of a standard 3 percent commission. This means that a seller’s agent who’s willing to negotiate will be paid less than a buyer’s agent. Buyers can choose to be represented by an agent, or to go without one — but in any case, all commission money for both sides of the deal is always paid by the seller. Listing on the MLS is essential for making a sale, and most MLSs are controlled by local NAR associations. “The conspiracy has saddled home sellers with a cost that would be borne by the buyer in a competitive market,” the lawsuit says. “Moreover, because most buyer brokers will not show homes to their clients where the seller is offering a lower buyer broker commission, or will show homes with higher commission offers first, sellers are incentivized when making the required blanket, non-negotiable offer to procure the buyer brokers’ cooperation by offering a high commission.”
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