ANALYSIS: HOUSE PASSAGE OF BANKRUPTCY BILL CREATING MOMENTUM FOR SENATE TO ACT
The House of Representatives yesterday voted to approve a bipartisan bill amending the Bankruptcy Code for large financial institutions as part of an ongoing response to the 2008 collapse of Lehman Brothers, and this could create momentum for the Senate to act on the legislation, The Deal reported today. H.R. 5421, titled the "Financial Institution Bankruptcy Act of 2014" (or FIBA), seeks to ensure that a failing big bank can employ the traditional bankruptcy process in a way that doesn't cause collateral damage to the global financial markets. The bill, which is supported by Wall Street, is intended to drive failing banks to employ bankruptcy instead of an alternative system set up by the post-crisis Dodd-Frank Act known as the Orderly Liquidation Authority. The OLA allows regulators to infuse a failing bank and its creditors with taxpayer funds initially to stem a panic emerging from a collapsing big bank. The bill also seeks to produce an expedited bankruptcy process at the same time that it maintains creditor priority as well as transparency in the process. Prospects for approval in the Senate are unclear, though the recent shift in control of the chamber into Republican hands could be encouraging news for supporters of big bank bankruptcy reform efforts on Capitol Hill. Sens. John Cornyn (R-Texas) and Pat Toomey (R-Pa.) last year introduced legislation known as the Taxpayer Protection and Responsible Resolution Act, which shares many of the characteristics of the House measure but also calls for repeal of the OLA. However, the Senate bill would need to have its effort to repeal the OLA removed in order to be approved by the Obama administration. The OLA system, as an alternative to bankruptcy, is a key component of the Obama administration's post-crisis reform effort, and any move to repeal it would likely receive a veto from the White House. Click here to read the full article.
COMMENTARY: REGULATION FOR PROFIT
After destroying for-profit Corinthian Colleges, the Department of Education is now brokering the sale of its schools to a government contractor that guarantees and collects federal student debt, according to a commentary in yesterday's Wall Street Journal. Santa Ana, Calif.-based Corinthian went out of business this summer after federal student aid funds were cut off by DOE for alleged regulatory violations. DOE's actions precipitated a liquidity crisis that threatened to bankrupt Corinthian. Consequently, Corinthian signed a living will to sell 85 schools and close 12 others. Corinthian has now disclosed that Zenith Education Group, a spinoff of the nonprofit Educational Credit Management Corporation Group (ECMC), has agreed to buy 56 campuses for a mere $24 million. Corinthian grossed $1.6 billion in revenue and took in about $1.4 billion in federal student aid last year. So for a modest down payment, the nonprofit has scored access to a font of federal cash. In return for rubber-stamping the acquisition, DOE is taking a 50 percent cut. Corinthian's $12 million remainder will go mainly toward refunding student debt, covering existing liabilities and paying litigation costs. DOE and other federal agencies haven't relinquished their legal claims against Corinthian, according to the commentary, but they have agreed not to sue the new nonprofit owner in return for a $17.25 million payment, which is on top of the $12 million. Click here to read the full commentary (subscription required).
NEW BILL WOULD AID ATLANTIC CITY, CASINOS ON TAXES
Atlantic City's eight surviving casinos would get a break on taxes and the city would get help making up for lost revenue under a rescue plan unveiled by two New Jersey state senators, the Associated Press reported today. The plan, introduced in the state legislature late Monday and announced today by State Senate President Steve Sweeney and Sen. James Whelan, would let the casinos collectively pay $150 million in lieu of taxes for two years. It would redirect an investment alternative tax currently used for redevelopment projects to help pay off $25 million to $30 million of Atlantic City's debt per year. The bill has many of the elements that the struggling Trump Taj Mahal Casino Resort, which is scheduled to close Dec. 12, has been seeking from state and local government in order to keep the casino open and save its 3,000 jobs. The plan helps the city by giving it a predictable revenue stream without the massive annual casino tax appeals that have helped drain the city's coffers. Four of Atlantic City's 12 casinos have closed this year, and the plan is designed to prevent any more from going belly-up. The bill also would mandate a minimum health insurance and retirement benefits package to each casino worker, which has been a major issue in the Taj Mahal labor dispute. Trump Entertainment won a bankruptcy court ruling in October that canceled its contract with Local 54 of the Unite-HERE union and freed the company from costly health insurance and pension obligations. The union is appealing that ruling, and the company has since offered to reinstate health coverage for two years and contribute to a new pension plan. Billionaire investor Carl Icahn, who plans to acquire Trump Entertainment by forgiving $286 million in company debt he owns, plans to invest $100 million into the Taj Mahal, but only if the union drops its appeal. Click here to read the full article.
UPCOMING EVENTS FOR THE RELEASE OF THE ABI CHAPTER 11 REFORM COMMISSION'S FINAL REPORT START ON SATURDAY AT THE WINTER LEADERSHIP CONFERENCE
The Final Report of ABI's Commission to Study the Reform of Chapter 11 will be previewed on Saturday, Dec. 6, at a session at ABI's Winter Leadership Conference. The Report is the culmination of more than two years of testimony, advisory reports and deliberations. To register and participate in the session, please click here. Those not in attendance can tap into the session via live webstream at http://commission.abi.org.
The full report will be available to download on the Commission site (http://commission.abi.org) at 8 a.m. ET on Dec. 8. For ABI members in the D.C. metro area, there is very limited space available for a special press briefing that will take place at 9 a.m. ET at the National Press Club. Members interested in attending should contact ABI Public Affairs Manager John Hartgen at [email protected].
Not able to participate or view the Commission's session at the Winter Leadership Conference this weekend? ABI will be holding a special abiLIVE webinar on Dec. 10 presenting the Final Report. In this 90-minute webinar, several members of the Commission, including both co-chairs and the official reporter, will provide insight to practitioners on the key findings as submitted to Congress. Click here to register.
LAW.ABI.ORG UPDATED TO REFLECT DEC. 1 RULE CHANGES
ABI's online Bankruptcy Code and Federal Rules of Bankruptcy Procedure site, law.abi.org, is completely current with the Dec. 1 Rule changes. Some of the updates affect forum for related cases, the time period for a valid summons and attorneys fee procedures. Substantial changes were made to the Rules relating to bankruptcy appellate procedures.
USTP NOTICE OF PROPOSED RULEMAKING ON CHAPTER 11 MONTHLY OPERATING REPORTS
Section 602 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) authorizes the U.S. Trustee Program (USTP) to issue rules requiring uniform periodic reports by debtors in possession or trustees in non-small business cases under chapter 11. The USTP just published in the Federal Register a notice of proposed rulemaking seeking public comment on the proposed rule and periodic report forms. The proposed rule is published in the Federal Register at 79 FR 66659 (Nov. 10, 2014) (to be codified at 28 C.F.R. pt. 58). The proposed rule, along with the proposed periodic report forms and instructions, may be viewed on the USTP's website. The proposed rule may also be accessed at www.regulations.gov. All public comments must be submitted on or before January 9, 2015, via www.regulations.gov. Please note that the proposed rule and forms only apply in chapter 11 cases filed by debtors that are not small businesses. Small business debtors are already required to use Official Form 25C, "Small Business Monthly Operating Report."
ABI MEMBERS WELCOME TO ATTEND TRIBUTE DINNER ON DEC. 11 TO HONOR BANKRUPTCY JUDGE STEVEN W. RHODES
ABI members are invited to attend a tribute dinner honoring the 29 years of service of Bankruptcy Judge Steven W. Rhodes of the United States Bankruptcy Court for the Eastern District of Michigan for his commitment to the bench, bar and community. The Tribute Dinner will be held at the Roostertail on the Detroit River and is being hosted by the Bankruptcy Community to honor and celebrate Judge Rhodes' service and career. Please contact David Lerner at (248) 901-4010 for more information. To attend, please go to http://www.cbadetroit.com/events/Judge-Rhodes-USBC-Invite-and-Form.pdf
NEW CASE SUMMARY ON VOLO: BAVELIS V. DOUKAS (IN RE BAVELIS; 6TH CIR.)
Summarized by Dean Langdon of DelCotto Law Group PLLC
Affirming the decision of the Bankruptcy Appellate Panel (which affirmed the bankruptcy court), the Sixth Circuit Court of Appeals ruled that the bankruptcy court had constitutional authority to enter a judgment sustaining an objection to the proof of claim filed by Quick Capital in debtor Bavelis's bankruptcy case. The Sixth Circuit also affirmed the BAP ruling that the bankruptcy court properly interpreted and applied Florida securities law to find no violation of such laws by Bavelis.
There are more than 1,500 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: TRUMP BANKRUPTCY MAY BE CONVERTED TO CHAPTER 7
A recent post discusses the possibility that Trump Entertainment's bankruptcy may be thrown into jeopardy given the worsening situation with other Atlantic City casino failures and the closure of the company's only remaining casino, Trump Taj Mahal.
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
A single set of mandatory, uniform federal bankruptcy exemptions should be adopted.
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