CHIEF JUSTICE ROBERTS WARNS OF IMPACT OF BUDGET CUTS ON JUDICIARY
In his annual year-end report on the federal judiciary, Chief Justice John Roberts Jr. on Tuesday warned that continued severe budget cuts would result in courtroom layoffs, trial delays and a "deepening threat to public safety at courts around the country," the Legal Times reported on Tuesday. Perpetuating "a hard freeze at the sequester level," Roberts said, would extend an emergency $15-per-hour rate reduction for private lawyers representing indigent criminal defendants, and reduced security for court personnel. Roberts said that he would have preferred to focus on other matters in his annual report, but "the budget remains the single most important issue facing the courts." The entire federal judiciary accounts for just two-tenths of one percent of total federal outlays, he noted, but the cuts imposed by sequestration have severely hampered court operations. Read more.
ABI on Monday joined four other national organizations in a letter to Congress to express its strong support for the Federal Judiciary's FY 2014 funding appeal of $7 billion for mandatory and discretionary appropriations, as requested by the Judicial Conference. To view the letter, please click here.
ANALYSIS: BUYOUT SHOPS DOUBLE DOWN WITH DEBT PURCHASES
Increasingly, when buyouts go badly, many are now purchasing the debt of companies that they took private, putting them in a position to use restructurings or bankruptcies to shed jobs, pensions or onerous debts and give themselves a second chance at making money on the deal, the Wall Street Journal reported today. The moves are sparking controversy in some cases and have become a hot topic among private-equity executives and restructuring advisers. The Loan Syndications and Trading Association, a New York trade group backing banks and other secured lenders, is developing guidelines for buyout firms to follow when purchasing debt of companies they own so they can avoid conflicts and legal skirmishes, said Elliot Ganz, the association's general counsel. The guidelines could take as long as a year to implement, he said. "The market isn't waiting for us. They're doing the deals the way they're doing the deals." Private-equity firms say that their debt-buying efforts can help a company stay afloat while also being profitable for them and their investors. Many restructuring experts say that the strategies are permissible so long as appropriate safeguards are in place, such as special board committees to negotiate for a private-equity firm as a creditor while the firm sits on the sidelines as an owner. From 2009 to December 2013, when companies owned by private-equity firms defaulted on debt, the owner firm maintained control 36 percent of the time, according to data compiled for the Wall Street Journal by David Smith, a University of Virginia finance professor. That is up from roughly 13 percent from 2004 to 2008. Read more. (Subscription required.)
LOAN MONITOR IS ACCUSED OF RUTHLESS TACTICS ON STUDENT DEBT
Founded in 1994, just after the largest agency backstopping federal student loans collapsed, Educational Credit Management Corp. (ECMC) is now facing concerns that its tactics have grown ruthless, the New York Times reported today. A review of hundreds of pages of court documents, as well as interviews with consumer advocates, experts and bankruptcy lawyers, suggest that ECMC's pursuit of student borrowers has veered more than occasionally into dubious terrain. A law professor and critic of ECMC, Rafael Pardo of Emory University, estimates that the agency oversteps in dozens of cases per year. A panel of bankruptcy appeal judges in 2012 denounced what it called Educational Credit's "waste of judicial resources," and said that the agency's collection activities "constituted an abuse of the bankruptcy process and defiance of the court's authority." Representative Steve Cohen (D-Tenn.), who has introduced a bill to limit predatory tactics, said, "The government should hold its agents to the highest standards, and I don't know that we've been doing that." Read more.
NEW ABILIVE WEBINAR SERIES LOOKS AT THE BASICS OF FINANCIAL STATEMENTS, DOCUMENTS AS EVIDENCE AND HEDGE FUNDS
Send your associates to ABI's "Back To Basics" webinar series, hosted by the Young and New Members Committee, next month. The series will cover the fundamentals of financial statements and operating reports (Jan. 14), using financial documents as evidence (Jan. 21), and hedge funds (Jan. 28). Let a trusted CLE provider help get your associates up to speed. Register for the complete series and get the third webinar free!
ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS
Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.
ABI IN-DEPTH
NEW CASE SUMMARY ON VOLO: THURNER INDUSTRIES INC., ET AL. V. GUNNISON ENERGY CORP. (IN RE RIVIERA DRILLING & EXPLORATION CO.; 10TH CIR.)
Summarized by Benjamin Ellison of the U.S. Bankruptcy Court for the Western District of Washington
Although there is a 300-day deadline for filing a plan of reorganization and disclosure statement in a small business chapter 11 bankruptcy, the Tenth Circuit BAP ruled that such a deadline applies only to the debtor, and not to creditors who propose a plan. The BAP therefore concluded that this case did not have to be dismissed, as argued by debtors who had failed to timely file their own confirmable plan. The BAP also found that the debtor's principals, unsecured creditors of the debtor who would receive no recovery under the plan, had sufficient economic management interest to entitle them to standing to bring the appeal.
There are more than 1,000 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: PRISON SENTENCES FOR PONZI SCHEMERS SHOULD BE LONGER, ACCORDING TO POLL
The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent post on the Ponzi Scheme Blog revealed the results of a December poll in which the overwhelming majority of respondents (80 percent) voted that prison sentences should be longer for Ponzi schemers.
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 debtor may strip liens in a "chapter 20" case.
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 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.
