ARGENTINE LEADER REJECTS U.S. SUPREME COURT RULINGS IN DEBT CASE
Argentina's president said Monday that the country would not abide by U.S. court rulings ordering payment of $1.5 billion to disgruntled creditors whose long-running legal battle against the nation received a boost from the U.S. Supreme Court earlier in the day, the Washington Post reported today. In a defiant address, President Cristina Fernandez de Kirchner called the court orders "extortion," but said that her country will continue making payments to holders of its restructured debt. The U.S. Supreme Court yesterday declined to consider Argentina's appeal of a U.S. court of appeals ruling that the country pay bondholders who had refused to accept Argentina's debt restructuring following a 2001 default. Argentina's stock market plummeted after the court action was announced on fears of another national default, which Argentine officials had said might occur if they have to pay the debts in full. U.S. courts have ordered the next payment due in two weeks. Read more.
For more on the Argentinian debt crisis, the Supreme Court's ruling and what happens next, make sure to attend Friday's Cross-Border Symposium on Friday in New York. The program will feature a keynote by James Millstein, who will discuss Argentia's debt situation. Millstein, chairman and CEO of Millstein & Co., represented the Republic of Argentina in connection with the exchange offer for its international bond indebtedness. Register here.
SENATORS INTRODUCE MEASURE TO HELP FAMILIES STRUGGLING WITH MEDICAL DEBT
Sens. Sheldon Whitehouse (D-R.I.) and Elizabeth Warren (D-Mass.) have introduced legislation to help families burdened by the costs of illness and injury, according to a press release on Friday. S. 2471, the "Medical Bankruptcy Fairness Act of 2014," would make the bankruptcy process more forgiving for those driven to insolvency by medical issues. "Even families with quality health insurance coverage can be bankrupted by an illness or injury that causes lost work and income," said Whitehouse, who introduced similar legislation in a previous session of Congress. The Medical Bankruptcy Fairness Act aims to offer more accommodative treatment in bankruptcy for individuals with large medical bills or who lose income due to an illness or injury or to care for a family member, according to a press release from Warren and Whitehouse. It would also cover people who lose alimony or child support due to the medical condition of the person responsible for paying it. For these consumers with medical debt, the bill would:
- waive procedural hurdles, such as credit counseling requirements, that make little sense for those driven to bankruptcy by medical issues.
- allow for the forgiveness of student loan debt.
- help families keep their homes by allowing them to maintain at least $250,000 in property.
Companies with junk ratings, ranging from designer fashion house Kate Spade & Co. to nut specialist Diamond Foods Inc., have been borrowing cash with few strings attached, the Wall Street Journal reported on Friday. Lending to weaker companies on easy terms is becoming more and more common as investors' appetite for higher-yielding debt grows stronger and the Federal Reserve keeps money flowing at ultra-low rates. Since the start of the financial crisis, companies have been able to borrow more without offering investors what were once considered standard protections against possible losses. More than half of the loans in the $747 billion U.S. market for loans made to junk-rated companies don't have financial "covenants," triggers that could cause a borrower to shore up its health, including periodic tests of overall debt levels and cash flow to cover scheduled interest payments. Thus far this year up through Thursday, 62 percent of leveraged loans lacked these regular requirements, up from 57 percent for all of 2013, according to S&P Capital IQ LCD. Read more. (Subscription required.)
ANALYSIS: PENSION FUNDS DANCING A TWO-STEP WITH RATINGS FIRMS
Pension fund investors lost billions of dollars by trusting the rosy credit ratings stamped on troubled mortgage securities prior to the 2008 crisis, and in the aftermath, pension funds have spent years and many dollars suing Moody's and Standard & Poor's, the New York Times reported on Sunday. However, there's a disconnect in some of these disputes. On the one hand, pension funds or state officials have been telling the courts that Moody's and S&P were negligent and that their ratings were marred by flawed methods and conflicts of interest. On the other hand, when the professionals who manage state funds buy bonds or mortgage securities, their investment policies require them to rely on the assessments of the very same ratings agencies. Consider the $300 billion California Public Employees' Retirement System (CalPERS) 2009 lawsuit against Moody's and S&P, which contends that the system lost $800 million on mortgage securities it bought based on those agencies' positive ratings. In the meantime, CalPERS' Statement of Investment Policy for Global Fixed Income says that the fund can invest in corporate bonds only if they are rated as investment grade by "a recognized credit rating agency," which it defines as Moody's, S&P or Fitch Ratings. Seventeen states have sued S&P, contending that they were misled on ratings. But many of these states have similar policies requiring that their investment professionals -- such as treasurers and pension overseers -- rely on S&P ratings. Read the full analysis.
HUD NOMINEE FACES SENATORS AS HOUSING RECOVERY SPUTTERS
Julian Castro, nominated in May to serve as secretary of the Department of Housing and Urban Development, is set to take over at a critical time for the agency as the housing recovery sputters, Bloomberg News reported today. After five years of focusing on stemming a record wave of home foreclosures, HUD faces a new crisis as tighter standards are causing home lending to slump to a 17-year low. The Federal Housing Administration, a mortgage insurer run by HUD that helps lower-income borrowers buy houses, is on pace to back only 500,000 loans for purchases this fiscal year, about half the number as in fiscal 2010. Castro, a third-term mayor of San Antonio who has said little publicly about the mortgage crunch and U.S. housing policy, faced questioning in his Senate confirmation hearing today. The real estate industry is now calling on the FHA to make changes to boost lending. As mayor of San Antonio, Castro's work on housing has centered on increasing the number of affordable rentals and redeveloping neighborhoods plagued by crime and joblessness. Under his leadership, San Antonio was one of only two cities nationwide that secured funds from both HUD and the Department of Education for local revitalization efforts. At the hearing, Castro said he plans to navigate between helping lower-income homebuyers and avoiding the kind of financial stress that led to a bailout of the FHA last year. Read more.
NEW CASE SUMMARY ON VOLO: PETTRY V. PATRIOT COAL CORP. (IN RE PATRIOT COAL CORP.; 8TH CIR.)
Summarized by Michael Cooley of Akin Gump Strauss Hauer & Feld LLP
The Eighth Circuit BAP affirmed the bankruptcy court's denial of the claimant's motion for reconsideration of an order sustaining the debtor's omnibus objection to the claims.
There are more than 1,300 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: FURTHER EXAMINATION OF THE SUPREME COURT'S DECISION IN CLARK V. RAMEKER
A recent blog post takes a further look at the Supreme Court's decision in Clark v. Rameker that inherited IRAs are not protected in bankruptcy.
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 special Bankruptcy Code chapter 14 should be created for "TBTF" (too-big-to-fail) financial institutions.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 43 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.