DEMOCRATS OPPOSE PROVISIONS OF $1 TRILLION SPENDING BILL THAT STRIPS SOME DODD-FRANK POWERS
Congressional liberals rebelled yesterday against a must-pass spending bill that would keep the government open past midnight Thursday, complaining that it would roll back critical limits on Wall Street and sharply increase the influence of wealthy campaign donors, the Washington Post reported today. In a Senate floor speech, Sen. Elizabeth Warren (D-Mass.) urged House Democrats not to support a bill to fund the government through September unless a provision reversing a rule created by the sweeping Dodd-Frank financial regulation law was removed. Republican leaders predicted that the House would easily approve the sprawling spending bill and send it to the Senate, which would face a midnight deadline tonight. Under the 2010 Dodd-Frank overhaul, banks are prohibited from using taxpayer-insured depositor funds for particularly risky derivative transactions. The provision in the current spending bill would repeal portions of the "push-out" provision of Dodd-Frank, which requires banks to push some derivatives trading into separate units that do not have access to deposit insurance. Read more.
REPORT: MEDICAL DEBT IS RUINING THE CREDIT SCORES OF MILLIONS OF AMERICANS
A report released today by the Consumer Financial Protection Bureau (CFPB) said that nearly 43 million Americans have delinquent medical debt on their credit reports, amounting to about one in five credit reports, the Washington Post reported today. The CFPB is calling attention to the burden that medical debt can create for consumers and the negative effect that it can have on their credit reports. The CFPB also created new reporting rules that could make it easier to spot errors. Medical bills account for just over half, or 52 percent, of all overdue debt that shows up on credit reports, the study showed. Many of these consumers would otherwise be deemed creditworthy: For 15 million people, medical debt is the only debt they have in collections in their credit report. Click here to read the CFPBs report.
ANALYSIS: FED BUBBLE BURSTS IN $550 BILLION OF ENERGY DEBT
Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG, Bloomberg News reported today. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts that the default rate for energy junk bonds will double to 8 percent next year. The Fed's decision to keep benchmark interest rates at record lows for six years has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks are being overlooked. A report from Mood’s Investors Service this week found that investor protections in corporate debt are at an all-time low, while average yields on junk bonds were recently lower than what investment-grade companies were paying before the credit crisis. Borrowing costs for energy companies have skyrocketed in the past six months as West Texas Intermediate crude, the U.S. benchmark, has dropped 44 percent to $60.46 a barrel since reaching this year's peak of $107.26 in June. Yields on junk-rated energy bonds climbed to a more-than-five-year high of 9.5 percent this week from 5.7 percent in June, according to Bank of America Merrill Lynch index data. At least three energy-related borrowers, including C&J Energy Services Inc., postponed financings this month as sentiment soured. Read more.
REPORT: RETAILER RISK OF FINANCIAL DISTRESS CONTINUES INTO HOLIDAY SEASON
While the holiday season is always a critical time for retailers, 2014 will be especially so for those "at risk" from either operational or financial distress, according to a new report by PricewaterhouseCoopers (PwC). While the entire U.S. retail industry (including major national department store chains) continues to draw the watchful eye of lenders, trade creditors and restructuring professionals, specialty retailers (those focusing on a single product or category such as consumer electronics or apparel) are at especially high risk for both operational and financial distress and could fall victim to a continuing shakeout of U.S. retailers heading into 2015, according to the report. Through October 2014, PwC reported that there were 23 U.S.-based retailer bankruptcy filings for the calendar year, slightly behind the rate for 2013, which saw 36 retailer filings. Click here to read the report.
AFTER DETROIT, KEVYN ORR SAYS HE'S NOT SURE WHAT'S NEXT
Kevyn Orr says he's not sure what he'll do next after masterminding the nation's largest-ever municipal bankruptcy, leading Detroit through a relatively speedy chapter 9 case that officially ended yesterday, the Detroit Free Press reported today. Orr, who played a key role in Chrysler's 2009 bankruptcy that was shepherded by the federal government, said yesterday that he thought the automaker's chapter 11 filing "was the top of my career." Then Detroit came calling again, with an offer by Gov. Rick Snyder to be the city's emergency manager and ultimately lead the city through a bankruptcy that shaved $7 billion of its $18 billion in debt. Orr said that he plans to take the rest of the year off before deciding what his next step will be. "Someone with his ability and track record can largely make their second act whatever they want it to be," said ABI executive director Samuel Gerdano. "A lot of history will be written on Detroit's bankrupcty, and his role will be central," Gerdano added. Read more.
REPORT: MOST COLLEGE STUDENTS DO NOT KNOW HOW MUCH THEY'RE PAYING TO GO TO SCHOOL
A new Brookings Institution report found that among college freshmen who have taken out federal student loans, more than a quarter (28 percent) don't think they have any federal debt, and 14 percent don't think they have any debt at all, the Washington Post reported today. Nationally, less than one quarter of first-year students were able to correctly estimate their debt totals within 10 percent of the actual value. A majority -- 51 percent -- underestimated their debt, while another 25 percent actually overestimated it. These numbers come from the National Postsecondary Student Aid Study, a representative survey of college students conducted in the spring of the 2011-2012 school year. If anything, these numbers probably undercount the students who don't understand their debt loads: "These results are particularly surprising given that we have limited the data to first year undergraduate students, who are unlikely to have student debt from prior years and thus should not be confused by previously accumulated debt," write Beth Akers and Matt Chingos, authors of the Brookings Institute report. Click here to read the Brookings Institute report.
ABI MEMBERS INVITED TO TRY BLOOMBERG BNA'S RECENTLY LAUNCHED BLOOMBERG LAW: BANKRUPTCY TREATISE
Bloomberg BNA welcomes ABI members to try the Bloomberg Law: Bankruptcy Treatise, an online-only resource recently launched to help attorneys consume information and conduct legal research in the fast-moving, procedurally complex area of bankruptcy. The Bankruptcy Treatise integrates the news content of Bloomberg BNA's bankruptcy news coverage with over 600 chapters and more than 13,000 pages of content and expert analysis from over 60 renowned judges, law professors and practitioners. The Bloomberg BNA editorial team, with input from outside contributors, will update the material as bankruptcy rules change and courts apply and react to them, ensuring that all aspects of federal bankruptcy law and local rules are current. Practitioners will be pleased to discover that Bloomberg Law: Bankruptcy Treatise includes expert commentary and analysis for all 92 different local rule sets throughout the country, providing unique insights across jurisdictions. For more information on Bloomberg Law: Bankruptcy Treatise and to request a free trial of Bloomberg Law, please click here.
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."
NEW CASE SUMMARY ON VOLO: LUNDAHL V. HALABI (10TH CIR.)
Summarized by Lars Fuller of BakerHostetler
The Tenth Circuit affirmed the rulings of the U.S. District Court (Wyoming) imposing sanctions and filing restrictions against the plaintiff and criminal contempt against the defendant, who appeared to be aligned with or invented by plaintiff to defeat diversity jurisdiction. The Tenth Circuit ruled that even though the plaintiff voluntarily dismissed the action before the court's sanction rulings, the court retained jurisdiction to enter sanction rulings, and sanctions were appropriately tailored and justified under circumstances of the plaintiff's abusive conduct and historical abusive behavior before multiple courts.
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.
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.
