In avoiding its debts, Argentina is gambling with contempt and faces the discipline of international markets, according to a commentary in the National Review on Friday. In 2001, Argentina defaulted for the seventh time on its sovereign debt to the tune of almost $80 billion in bonds. The country attempted unilaterally, with no negotiations whatsoever to offer bondholders new bonds worth roughly 33 cents on the dollar, a deal that was among the sharpest haircuts in the history of international finance, according to the commentary. A small group of holdout bondholders, mostly hedge funds, rejected this deal and decided to have their day in court, in order to collect what was owed to them, according to the terms of the bonds as originally issued. The lawsuit was filed in New York because when Argentina issued the bonds, the country voluntarily chose to sell the bonds in the U.S., and the country voluntarily waived its sovereign right to immunity from suit, agreeing that the bonds would be sold pursuant to U.S. commercial law. Applying U.S. law in 2012 after years of witnessing Argentin's maneuvers to evade its contractual obligations and repudiate its debts U.S. District Judge Thomas Griesa ruled that the holders of the original bonds had valid claims and that these "holdout creditors" had to be paid alongside Argentina's other creditors, which means that the holdout creditors had to be paid the same proportion of the debt owed to them as was being paid to the holders of the substitute bonds, and that such payments had to be made until the holdouts were repaid in full. On appeal, the Second Circuit upheld Grisea's ruling, and the U.S. Supreme Court declined to hear Argentina's further appeal. Out of legal options and determined not to negotiate with the holdouts, Argentina went into default at the end of July, further isolating itself from the capital markets and causing increased economic hardship for its citizens. Read the full commentary.
ANALYSIS: M&A HAS SLOWED, BUT DEALS ARE IN PIPELINE
While rocky stock and debt markets, political uncertainty abroad and the U.S. midterm elections have contributed to the slowdown in mergers and acquisitions, lawyers as well as bankers say that they still have a robust pipeline of deals, Bloomberg News reported yesterday. Globally, companies in October struck about $232 billion of takeovers the lowest amount since March and below the average of about $300 billion in each of the prior six months. One deterrent the U.S. government's crackdown on purchases that help companies shift their tax domicile abroad might have a lasting impact. It led to one high-profile termination in October: AbbVie Inc.'s planned $52 billion acquisition of Shire Plc. Regardless of this trend, 2014 is on track to be the best year for takeovers since before the financial crisis, data compiled by Bloomberg show. Read more.
COMMENTARY: DRIVING STUDENT BORROWERS INTO DEFAULT
People who pay for college with federal student loans can avoid default when they fall on hard times by making lower payments or no payments at all until they recover financially, but borrowers who take out private student loans from banks and other institutions typically have no such option, according to an editorial in today's New York Times. When they lose their jobs or suffer other financial setbacks, they have little choice but to default, which, in turn, damages their credit histories and ability to borrow for other purposes or even to find a job, according to the editorial. Federal regulators and members of Congress have been pressing private lenders to adopt flexible payment plans like those available through the federal loan system to no avail, according to a report released last month by the student loan ombudsman at the Consumer Financial Protection Bureau. Congress may have to step in and require them to do so, according to the editorial. Read the full editorial.
ANALYSIS: FLAW IN NEW "SECURE" CREDIT CARDS WOULD LET HACKERS STEAL UP TO $1 MILLION PER CARD
As U.S. banks and retailers are barreling toward a 2015 deadline to replace magnetic-stripe credit and debit cards with more secure cards that come embedded with a microchip, researchers have announced a critical flaw in the card system, Wired Magazine reported yesterday. According to researchers at Newcastle University in the U.K., the card system developed by VISA for use in the United Kingdom fails to recognize transactions made in non-U.K. foreign currencies and can therefore be tricked into approving any transaction up to $999,999.99. What's more, because the cards allow for contactless transactions, wherein consumers need only to have the card in the vicinity of a reader without swiping it, a thief carrying a card reader designed to read a card that's stored in a wallet or purse could conduct fraudulent transactions without the victim ever removing their card. Since the transaction is done offline without going through a retailer's point-of-sale system, no other security checks are done. "With just a mobile phone we created a POS terminal that could read a card through a wallet," Martin Emms, lead researcher of the project that uncovered the flaw, noted in a statement about the findings. "All the checks are carried out on the card rather than the terminal so at the point of transaction, there is nothing to raise suspicions. By pre-setting the amount you want to transfer, you can bump your mobile against someone's pocket or swipe your phone over a wallet left on a table and approve a transaction." In tests the researchers conducted, transactions took less than a second to be approved. Read more.
For more on cybersecurity, be sure to attend the keynote at ABI's Winter Leadership Conference featuring Theresa Payton, cybersecurity expert and former White House CIO, talking about current cybersecurity and privacy issues. To register, please click here.
NOW AVAILABLE FOR PRE-ORDER: BEST OF ABI 2014 BOOK BUNDLE
Now available for pre-order in the ABI Bookstore is the Best of ABI 2014 book bundle containing The Year in Business Bankruptcy and The Year in Consumer Bankruptcy. These must-have references contain the best ABI Journal articles and papers from ABI's top-rated educational seminars, with Spring 2014 ABI Resident Scholar Prof. Charles Tabb selecting the most important developments in business bankruptcy and Fall 2014 ABI Resident Scholar Prof. Lois Lupica choosing important consumer bankruptcy developments. Make sure to log in to the site to get your discounted ABI member pricing. The ABI member price for each book is $50, but take advantage of this bundle offer and save even more! The books will ship in early December. Click here to order.
NEXT FREE COMMITTEE TELECONFERENCE WILL BE THURSDAY'S COMMERCIAL FRAUD COMMITTEE CALL!
Members are encouraged to dial-in and listen to or participate on upcoming ABI Committee conference calls. While committee membership is encouraged, it is not required to join the free teleconferences. Upcoming committee teleconferences include:
- Commercial Fraud Committee: Thursday, Nov. 6; 4 p.m. ET
- Unsecured Trade Creditors Committee: Wednesday, Nov. 12; 4 p.m. ET
Topic: "Chapter 11 Reform Commission's Consideration of a Proposal to Surcharge Secured Lenders for 363 Asset Sales"
Speakers: Kathryn A. Coleman of Hughes Hubbard & Reed LLP and Gregory A. Bray. Moderator: Risa Wolf-Smith of Holland & Hart LLP.
All committee teleconferences are free to ABI members, and registration is not required. Simply utilize the following dial-in information:
Call in: (712) 432-1500
Participant code: 692933
NEXT ABI LIVE WEBINAR ON NOV. 20 FOCUSES ON PROFESSIONAL FEE CASE BEFORE THE SUPREME COURT
The next abiLIVE webinar will be held on Nov. 20 and will feature a discussion on a case before the Supreme Court that could have a major impact on professional fees for bankruptcy practitioners. In this 75-minute webinar, Thomas J. Salerno of Gordon Silver (Phoenix) and J. Maxwell Tucker of Squire Patton Boggs LLP (Dallas), along with moderator Judge Gregg W. Zive (D. Nev.; Reno, Nevada) will discuss the professional fee issues presented in Baker Botts LLP v. ASARCO LLC, No. 14-103, which was granted certiorari by the Supreme Court on Oct. 2. Click here to register for this important webinar! Click here to register for this important webinar!
ABI MEMBERS IN SOUTHERN CALIFORNIA- DON'T MISS THE SPECIAL TMA EVENT TO BENEFIT THE WOUNDED WARRIOR PROJECT ON NOV. 12
ABI members are invited to attend TMA Southern California's special fundraiser to support the Wounded Warrior Project and SoCal veteran support groups on Nov. 12 at the Beverly Hilton. Funds raised will benefit the Wounded Warrior Project, Veterans Legal Institute and the Public Law Center. For more information or to attend, please click here.
ABI MEMBERS INVITED TO ATTEND RETIREMENT DINNER FOR BANKRUPTCY JUDGE PETER J. WALSH ON NOV. 19
ABI members are invited to a special retirement dinner on Nov. 19 honoring the Hon. Peter J. Walsh's 50 years of dedicated service to the bench and bar. The event will be held at the Chase Center on the Riverfront in Wilmington, Del., and is being hosted by the Bankruptcy Section of the Delaware State Bar Association and the Delaware Chapter of the Federal Bar Association. Questions should be directed to Karen B. Owens at 302-654-1888. To attend, please go to https://sites-pepperhamilton.vuturevx.com/107/772/uploads/judge-walsh-retirement-dinner-form.pdf
NEW CASE SUMMARY ON VOLO: LEONARD V. PICCIRILLI (IN RE MEGA-C POWER CORP; 9TH CIR.)
Summarized by Joel Newell of Lane & Nach P.C.
Bankruptcy courts have inherent authority to enter sanctions; however, the bankruptcy court must make a finding of bad faith or willful misconduct. The Ninth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court's decision that the shareholder trustee did not comply with the bankruptcy court's prior orders to turn over the shares; the shareholder trustee was unable to find evidence that they substantially complied with the prior bankruptcy court orders, and the shareholder trustee's prior disregard of the bankruptcy court's orders evidenced that lack of good faith.
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: IS OUTSOURCING THE VOLCKER RULE'S ACHILLES HEEL?
A recent blog post found that banks are hiring armies of lawyers, accountants, compliance consultants and IT vendors as they prepare to comply with the Volcker Rule, and, ironically, their attempts to fortify themselves with outsourced knowledge could expose them to more operational risk.
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.
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.