Big companies have disclosed widening pension gaps this earnings season, extending the deficit to a near record between what companies expect to owe retirees and what they have on hand to pay them, the Wall Street Journal reported today. During the current earnings season, companies including UPS, Boeing Co., Ford Motor Co. and Goodyear Tire & Rubber Co. have disclosed growing pension-fund deficits, even though they have plowed billions of dollars into their plans and strong stock markets have boosted their investment returns. Across America's business landscape, the gap between the amount that companies expect to owe retirees and what they have on hand to pay them was an estimated $347 billion at the end of 2012. That is better than the $386 billion gap recorded at the end of 2011, but the two years represent the worst deficits ever, according to J.P. Morgan Asset Management. The firm estimates that companies now hold only $81 of every $100 promised to pensioners. Read more. (Subscription required.)
For further analysis of the pension gap currently facing companies, as well as an in-depth look at liability issues in bankruptcies, be sure to register for the ABI Live Webinar on April 5 examining the issues tied to legacy liabilities.
COMMENTARY: LIQUIDATION AUTHORITY AND THE BANKRUPTCY CLAUSE
The litigation against the Dodd-Frank Act's orderly liquidation authority continues, with an amended complaint filed last week, adding a few more states to the mix, and the deadlines with regard to the government’s motion to dismiss reset accordingly, according to a commentary yesterday by Prof. Stephen Lubben in the New York Times DealBook blog. The revised complaint continues to assert that the authority "constitutes an exercise of Congress's power under the Bankruptcy Clause." The Bankruptcy Code, according to Lubben, is all about providing the debtor with options. Today, an individual debtor can file under as many as four distinct chapters. During the New Deal era, the bankruptcy laws included Section 77 for railroads, Chapters X and XI for other corporations, and liquidation, reorganization and composition proceedings for individuals. At the time, Congress created the FDIC and vested it with authority over bank insolvencies – probably under the Bankruptcy Clause, whether or not the banking lawyers know it. In chapter 11 alone, the debtor is given broad flexibility to shape a plan that fits the debtor's particular needs. There is no requirement that all debtors follow any specific path. The orderly liquidation authority litigation proceeds from the faulty notion that chapter 11 provides a one-size-fits-all solution, whereas it is clear that one reason chapter 11 and its predecessors have been so successful rests in the flexible nature of the proceedings. Read more.
SURVEY: AMERICANS ANXIOUS ABOUT RETIREMENT
Even as the economy slowly improves, the vast majority of Americans remain deeply worried about their ability to achieve a secure retirement, according to a new survey, the Washington Post reported today. The poll, released today by the National Institute on Retirement Security (NIRS), found that 55 percent of Americans are "very concerned" that the current economic conditions are harming their retirement prospects. An additional 30 percent reported being "somewhat concerned" about their ability to retire. As aging Americans are increasingly burdened by debt, spiraling health care costs and diminishing pension coverage, an increasing number of researchers argue that a long era of improved living standards for the elderly is now in jeopardy. The Senate's Health, Education, Labor and Pension Committee says that the nation faces a $6.6 trillion retirement-savings deficit. Meanwhile, a retirement security index developed by Boston College’s Center on Retirement Research, as well as economists at the New School, have found that a majority of Americans are at risk of being financially worse off than their parents in retirement. Read more.
TREASURY TO SELL $158 MILLION TARP STAKE IN NINE BANKS
The Treasury Department has begun an auction for its Troubled Asset Relief Program (TARP) stake in nine more banks, American Banker reported today. The Treasury yesterday began a Dutch auction for the shares, which it expects to close on Thursday evening to sell approximately $158 million and represents its full TARP holdings in nine banks. The single largest stake the Treasury plans to auction is its $73 million holding in Old Second Bancorp in Aurora, Ill., the parent company of the $1.9 billion-asset Old Second National Bank. The Treasury has held a number of auctions over the past year as part of its effort to wind down the TARP program, and to date, it has sold stakes in nearly 100 banks. A little more than 200 banks remain in the program, and its plan is to sell its stakes in roughly two-thirds of them. Read more.
In related news, the House Oversight and Government Reform Committee held a hearing today titled "Bailout Rewards: The Treasury Department's Continued Approval of Excessive Pay for Executives at Taxpayer-Funded Companies." For more information and to read the prepared witness testimony from Christy Romero, the Special Inspector General for TARP, and Patricia Geoghegan, the Acting Special Master for TARP Executive Compensation, please click here.
ANALYSIS: DETROIT'S RACE FOR MAYOR OFFERS UNCERTAIN PRIZE
As Michigan Governor Rick Snyder (R) moves closer to taking control of the state's largest city, contestants are lining up to fight for what could turn into a largely powerless job: mayor of Detroit, according to a Wall Street Journal analysis yesterday. Mike Duggan, a former prosecutor who later led a turnaround at one of Detroit's largest hospitals, is expected to announce his candidacy today. Duggan will likely face Wayne County Sheriff Benny Napoleon, a lifelong Detroiter who worked in the city's police department for years before becoming chief in 1998, a post he held for three years. In 2009, he was elected sheriff for Wayne County, which includes Detroit. Napoleon, a Democrat, said in an interview that while his administration would address the city's economic crisis, blight and struggling public schools, "none of it means very much if we can't get a handle on the violence." A poll Duggan's campaign commissioned showed Napoleon to have the greatest name recognition among the challengers, and Napoleon and Duggan to be the leading potential candidates, well ahead of the current mayor, Dave Bing. Bing, for his part, said last week that he has not decided whether to seek re-election. The potential candidates are vying for a post that may have no real power if Republican Gov. Rick Snyder puts an emergency manager in charge of Detroit's government in an effort to avert what could be the biggest municipal bankruptcy in U.S. history. Read more. (Subscription required.)
DON’T MISS THE ABI LIVE WEBINAR ON APRIL 5 - "LEGACY LIABILITIES: DEALING WITH ENVIRONMENTAL, PENSION, UNION AND SIMILAR TYPES OF CLAIMS"
A panel of experts has been assembled for a webinar on April 5 from 1-2:15 p.m. ET to discuss environmental and pension liabilities, the statutory schemes under which these liabilities arise and the key players involved. Are non-monetary environmental claims dischargeable? Do post-petition expenditures for environmental cleanup constitute administrative expenses? When can an employer terminate a pension plan in bankruptcy, what is the process and what are the consequences? Learn the answer to these questions and more from the comfort of your own office. Special ABI member rate is available! Register here as this webinar is sure to sell out.
ABI'S ANNUAL SPRING MEETING: CONSUMER PROGRAMMING WITH CROSS-OVER APPEAL
With four session tracks looking at issues geared toward chapter 11 restructurings, financial advisors, professional development and consumer bankruptcy, a number of sessions at ABI's Annual Spring Meeting have cross-over appeal for both consumer and business practitioners. Sessions include:
• The Appellate Process: This distinguished panel will explore recent issues in appellate practice that are of interest to both consumer and business practitioners, including the ability to bypass intermediary appellate courts and take appeals directly to the circuit courts.
• Consumer Class Actions: This panel will explore the potential benefits and pitfalls of class actions by debtors/trustees against creditors in chapter 13 cases, which are highlighted by two recent decisions of the Fifth Circuit. Many of the issues discussed during this panel will be useful in business cases as well.
• The Individual Conundrum - Chapter 7, 11 or 13?: Deciding on the appropriate chapter for a high net worth individual contemplating a bankruptcy filing can be a daunting task. This panel will explore the considerations that guide the practitioner in advising individual clients in making this decision.
To register for the Annual Spring Meeting and to see the full schedule of program tracks and events, please click here.
ABI IN-DEPTH
MARK YOUR CALENDARS FOR APRIL 10 TO TAKE PART IN ABI’S LIVE WEBINAR "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS – BUT DOES CONGRESS?"
Do not miss the "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?" webinar presented by ABI's Consumer Bankruptcy Committee on April 10 from noon-1:15 ET. ABI's panel of experts will provide an overview of the student loan industry, examine the numbers behind and causes of student loan debt, and discuss federal loan programs as well as federal consolidation and forgiveness programs. Faculty on the webinar includes:
Prof. Daniel A. Austin of Northeastern University School of Law (Boston)
Edward "Ted" M. King of Frost Brown Todd LLC (Louisville, Ky.)
Craig Zimmerman of the Law Offices of Craig Zimmerman (Santa Ana, Calif.)
CLE credit will be available for the webinar. This webinar is sure to sell out; register now for the special ABI member rate of $75!
NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!
An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!
The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!
LATEST CASE SUMMARY ON VOLO: CLINTON GROWERS V. PILGRIM'S PRIDE CORP. (IN RE PILGRIM'S PRIDE CORP.; 5TH CIR.)
Summarized by John Jones of JRJONESLAW PLLC
The Fifth Circuit affirmed the bankruptcy court's grant of summary judgment for Pilgrim's Pride Corporation (PPC) on the ground that written contracts between PPC and Clinton Growers had barred the alleged oral promises of a contract for the long haul and the promissory estoppel claim under the "contract bar" doctrine. The Fifth Circuit held that promissory estoppel applies only when the elements of a contract cannot be shown to exist. Under the "contract bar" doctrine, a party alleging promissory estoppel can succeed only by showing that the written contract does not cover the subject matter underlying the promissory estoppel claim.
There are more than 750 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.
NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: ASSIGNMENT OF RENTS: SAN BERNARDINO AND CALPERS CONTINUE BATTLE OVER CITY'S DEBTOR ELIGIBILITY
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. While the city of San Bernardino, Calif., filed its chapter 9 petition on August 1, 2012, the city and the California Public Employees’ Retirement System (CalPERS) continue to be at odds, according to a recent blog post. Prior to a status conference scheduled for February 12, CalPERS filed a report contending that the city's condition had "deteriorated" since the December status conference held at the bankruptcy court. CalPERS argued that there has been a "mass exodus" of key personnel that "were critical to the city's restructuring efforts and instrumental in developing and maintaining the city's relationship with CalPERS and other key creditor constituencies." In addition, CalPERS accused the city of not being "transparent" in its dealings with creditors.
Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.
ABI Quick Poll
As a result of the RadLAX decision, the right to credit-bid will likely chill bidding at auctions, as potential purchasers may be dissuaded from participating in the bidding process.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
INSOL INTERNATIONAL
INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.
