Creditor Lawsuit Could Undo Auto Bailout Force GM into Bankruptcy

Creditor Lawsuit Could Undo Auto Bailout Force GM into Bankruptcy

ABI Bankruptcy Brief | October 9, 2012
 
  

October 9, 2012

 
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CREDITOR LAWSUIT COULD UNDO AUTO BAILOUT, FORCE GM INTO BANKRUPTCY

A backroom deal negotiated by General Motors during the auto bailout to fulfill the Obama administration's demand for a quick bankruptcy could be reversed, draining the automaker of nearly all of its cash on hand and leaving it in worse shape than it was when it collapsed in 2009, according to a report in the Washington Free Beacon yesterday. As GM teetered on the edge of bankruptcy in June 2009, it cut a $367 million "lock-up agreement" with several major creditors in order to prevent its Canadian subsidiary from going under. The move spared the subsidiary from fulfilling the $1 billion debt it owed the creditors—major hedge funds—ensuring that GM would not have to face bankruptcy courts in two nations, which could have delayed the company’s recovery. "Many U.S. creditors waived their rights to object because the government wanted to push through the bailout for political reasons," risk analyst Chris Whalen said. "If they had continued through normal channels, they could have easily been in bankruptcy for five years." "When I approved the sale agreement and entered the sale approval order, I mistakenly thought that I was merely saving GM, the supply chain, and about a million jobs,” Bankruptcy Judge Robert Gerber said in July. “It never once occurred to me, and nobody bothered to disclose, that amongst all of the assigned contracts was this lock-up agreement, if indeed it was assigned at all." Industry experts say that GM should be very concerned with the judge’s reaction to the deal. More is at stake than the roughly $1 billion that “old GM’s” spurned creditors are seeking, according to industry observers. Judge Gerber may have to reopen the entire bailout, and that, according to bankruptcy experts, could unravel the entire settlement. Read more.

U.S. CHARGES 530 PEOPLE IN MORTGAGE PROBE WITH $1 BILLION IN LOSSES

Attorney General Eric Holder said today that the U.S. brought charges against 530 people over mortgage schemes that cost homeowners more than $1 billion, Bloomberg News reported. More than 73,000 homeowners were victims of various frauds for which charges were filed during a year-long crackdown, including "foreclosure rescue schemes" that take advantage of those who have fallen behind on payments, the Justice Department said. Typical schemes involved promises to homeowners that foreclosures could be prevented by payment of a fee, according to the statement. As part of the schemes, "investors" purchase the mortgage or the titles of homes are transferred to those taking part in the fraud, resulting in homeowners losing their property, the department said. Read more.

COURT SAYS CONGRESS CANNOT BLOCK PAY HIKES FOR JUDGES

The U.S. Court of Appeals for the Federal Circuit in a 10-2 decision on Friday found that Congress cannot revoke cost-of-living adjustments promised to federal judges in the Ethics Reform Act of 1989, reversing the court's holding to the contrary in 2001, the National Law Journal reported yesterday. Six current and retired federal judges sued over Congress' decision to block cost-of-living adjustments in the past and whether legislation passed after the court's 2001 decision overrode provisions of the 1989 law. In the Oct. 5 decision, the court found that Congress had violated the Compensation Clause of the Constitution, which aims to protect judicial independence by limiting the ability of the other branches of government from reducing judges' salaries. If Congress wanted to amend the 1989 law, the judges wrote, it could, but not in a way that affected any sitting judges. Read more.

WALL STREET REGULATOR RAMPS UP ENFORCEMENT

The Commodity Futures Trading Commission (CFTC), once considered a toothless regulator, brought a record number of enforcement cases over the past year as fines soared, the New York Times DealBook blog reported on Friday. The agency said on Friday that it levied $585 million in sanctions during its 2012 fiscal year, which ended Sept. 30, up from $450 million the year before. The surge in fines is largely tied to one case. In June, the British bank Barclays agreed to pay $200 million to the agency for trying to manipulating a crucial interest rate. Read more.

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SHOW YOUR SUPPORT FOR STEVEN GOLICK, A COLLEAGUE AND ABI LEADER

Our friend Steven Golick (Osler Hoskin & Harcourt LLP, Toronto) is facing a medical crisis. He has been diagnosed with a serious brain tumor, requiring complex surgery and treatment. Steven’s spirits are very strong and he and his family remain optimistic, but he can use our support. A prominent international restructuring attorney and an ABI member since 1994, Steven is also a founding member of the ABI house band, the Indubitable Equivalents. Because the band is important to Steven, his fellow band-mates have organized a new Blog site for Steven's friends and colleagues to show their love and support at this critical time. Please click on this link to share your thoughts with many others, and post as often as you'd like.

ABI IN-DEPTH

LAST CHANCE TO GET YOUR TICKET FOR TOMORROW’S PLAYOFF GAME TO SEE THE ST. LOUIS CARDINALS TAKE ON THE WASHINGTON NATIONALS IN D.C.!

Only a few tickets remain to the ABI Endowment's special event at Nationals Park tomorrow at 1 p.m. ET to see the St. Louis Cardinals take on the Washington Nationals in Game 3 of the National League Division Series. For $400, you will receive a game ticket to a luxury suite, food and open bar. Don't miss playoff baseball in Washington, D.C.! Click here to register!

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MEMBERS WILL NOT WANT TO MISS ABI'S PROGRAM AT NCBJ'S ANNUAL MEETING ON OCT. 26

Members planning to attend the 86th Annual NCBJ Annual Conference in San Diego from Oct. 24-27 will not want to miss the exciting line-up scheduled for the ABI program track on Oct. 26. In addition to roundtable discussions on the hottest consumer and business bankruptcy topics, ABI will be hosting a ticketed luncheon that will feature the presentation of the 7th Annual Judge William L. Norton, Jr. Judicial Excellence Award and entertainment by Apollo Robbins, a sleight-of hand artist, security consultant and self-described gentleman thief. Click here to register for the Conference.

To view the list of ABI programs on Oct. 26 and the full NCBJ Annual Conference schedule, please click here.

ABI's Chapter 11 Reform Commission will also be holding a public hearing on Oct. 26 from 2:30-4:30 p.m. PT at the San Diego Marriott. Interested parties have the opportunity to submit testimony at the hearing. For further information, please contact ABI Executive Director Samuel J. Gerdano at [email protected]

LATEST CASE SUMMARY ON VOLO: LIQUIDATORS OF LEHMAN BROTHERS AUSTRALIA LTD. V. LEHMAN BROTHERS SPECIAL FINANCING INC. (IN RE LEHMAN BROTHERS HOLDINGS INC.; 2D CIR.)

Summarized by Janice Grubin of Todtman, Nachamie, Spizz & Johns, P.C.

The Second Circuit vacated and remanded the judgment of the district court and reinstated the appeal for consideration of the bankruptcy court order denying intervention on the merits. Given that (1) denials of intervention are generally considered to be final appealable orders in the non-bankruptcy context, (2) the bankruptcy standard for finality is more flexible than other civil litigation and (3) the pragmatic approach is required by the instant circumstances, the Circuit held that the bankruptcy court's denial of the appellants' motions to intervene was a final, appealable order.

There are more than 650 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: PINNACLE UNIONS BALK AT AIRLINE'S ATTEMPTS TO SCRAP CONTRACT

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post reported on how Pinnacle Airlines Corp.'s thousands of pilots and flight attendants are objecting to the airline’s bid to scrap their contracts, a move the regional carrier says is necessary to exit bankruptcy protection.

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

Bankruptcy courts should adopt formal loss mitigation procedures to facilitate the negotiation of residential mortgage modifications for consumer debtors.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?

Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

INSOL INTERNATIONAL

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LAST CHANCE!

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COMING UP:

 

ABI YOUNG AND NEW MEMBERS COMMITTEE “TRENDING ISSUES: EXAMINERS AND SELECT PLAN CONFIRMATION ISSUES” WEBINAR
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Oct. 16, 2012
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Oct. 18, 2012
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ABI/ST. JOHN'S "BANKRUPTCY AND RACE: IS THERE A RELATION?" SYMPOSIUM
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  CALENDAR OF EVENTS
 

October
- ABI Endowment Event: Nationals Playoff Game
     October 10, 2012 | Washington, D.C.
- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar
October 15, 2012
- ABI/Bloomberg Distressed Lending Conference
October 16, 2012 | New York, N.Y..
- International Insolvency and Restructuring Symposium
     October 18, 2012 | Rome, Italy
- ABI/St. John's "Bankruptcy and Race: Is There a Relation?" Symposium
     October 19, 2012 | Queens, N.Y.
- ABI Program at NCBJ's Annual Conference
     October 26, 2012 | San Diego, Calif.

November
- U.S./Mexico Restructuring Symposium
     November 7, 2012 | Mexico City, Mexico
- Professional Development Program
     November 9, 2012 | New York, N.Y.

  

 

- Detroit Consumer Bankruptcy Conference
     November 12, 2012 | Detroit, Mich.
- Winter Leadership Conference
     November 29 - December 1, 2012 | Tucson, Ariz.

December
- Forty-Hour Bankruptcy Mediation Training
     December 4-8, 2012 | New York, N.Y.

2013

January
- Rocky Mountain Bankruptcy Conference
     January 24-25, 2013 | Denver, Colo.

February
- Kansas City Advanced Consumer Bankruptcy Practice Institute
     February 17-19, 2013 | Kansas City, Mo.


 
 
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