DETROIT BECOMES BIGGEST U.S. CITY TO FILE FOR BANKRUPTCY
Detroit today became the biggest U.S. city to file for bankruptcy as it officially sought bankruptcy court protection from its creditors while it tries to eliminate a budget deficit and cut its long-term debt, Bloomberg News reported today. The city listed assets and debt of more than $1 billion in a chapter 9 petition filed today in federal court in Detroit. Kevyn Orr, the state-appointed emergency fiscal manager, warned in May that the city might run out of cash. His proposal to restructure more than $17 billion in debt and long-term obligations includes cutting pension payments, ending cost-of-living increases, removing some workers from the system and making the rest pay more. "Without a significant restructuring of its debt, the city will be unable to break the cycle of damaging cutbacks in essential municipal services and investments," Orr said in a report. The case is City of Detroit, 13-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit). Read more.
LEGISLATION REINTRODUCED TO STOP EMINENT DOMAIN PROPOSALS AIMED AT UNDERWATER HOMEOWNERS
Rep. John Campbell (R-Calif.) reintroduced "The Defending American Taxpayers from Abusive Government Takings Act" today to stop city and county governments from enacting eminent domain policies aimed at underwater homeowners, according to a press release today from Campbell's office. Despite the failure of Mortgage Resolution Partners LLC (MRP) to receive approval for their eminent domain proposal by San Bernardino County, Calif., and Chicago last year, local governments and cities around the country are entertaining similar proposals. Cities in California and Nevada continue to consider MRP's proposal for local governments to seize mortgages from bond trusts to cut balances and help homeowners. MRP recently sent letters to securities trustees and loan servicers asking them to verify their roles in specific deals and provide information about individual mortgages that could be purchased. MRP must try to negotiate to buy the loans before municipalities can use powers known as eminent domain to force the sales, and then they would then lower the principal owed. The moves signal a renewed battle over the initiative, which has drawn opposition from bondholders such as Pacific Investment Management Co. and DoubleLine Capital LP and at least 18 trade groups representing the finance industry, homebuilders and real-estate firms. Rep. Campbell introduced the same measure last year in response to the MRP proposal. "Using eminent domain to seize mortgages is not only legally questionable," said Campbell, "it represents a complete abrogation of private property rights. The federal government and the American taxpayer would be forced to bear all the risk in the event of a failure." To read Rep. Campbell's press release on the legislation, please click here.
To read the Bloomberg News analysis, please click here.
SENATORS REACH DEAL ON STUDENT LOANS, PREPARE FOR VOTE
Under pressure from the White House, senators are quickly moving forward with a plan to change how the government sets federal student loan interest rates, tying them to market rates but imposing caps on how high those rates can go, the Associated Press reported today. Senate Majority Leader Harry Reid (D-Nev.) said today that a vote could come this week. The deal was brokered by a bipartisan group of senators who have been negotiating for weeks, with the help of Department of Education staffers who have been camped out in their offices. Under this new deal, finalized today, undergraduates would all pay the same interest rate, a change from recent years when some low- and middle-income students received a lower rate. Graduate students and parents of students would have their own rates, which would be higher than those for undergraduates and have higher caps. The plan is expected to save the government $715 million over a decade, according to aides. For the coming school year, undergraduates would see rates of 3.86 percent. That's lower than the current fixed rate of 6.8 percent, but the new rate could go as high as 8.25 percent in future years. Graduate students would pay about 5.41 percent for the coming year and up to 9.5 percent in the future. Loans taken out by parents for their dependent children would have an interest rate around of 6.41 percent that could go as high as 10.5 percent. Right now, graduate students have interest rates of 6.8 and 7.9 percent, while parents pay 7.9 percent. Read more.
ANALYSIS: REGULATORY RIFT DEVELOPS GLOBALLY OVER FINANCIAL SYSTEM
Global regulators are pursuing disparate approaches to protecting the financial system against future shocks, fracturing an agreement forged in the wake of the 2008 financial crisis to adopt a coordinated response, the Wall Street Journal reported today. Policymakers, at odds over how to reduce risk in the financial system, are disagreeing over what the proper capital levels should be for banks, derivatives regulation, criminal prosecutions of bankers and even the appropriate forum for brokering agreements on financial-services issues. Countries such as the U.S., U.K. and Switzerland are demanding that banks build thicker capital cushions to absorb losses and bigger liquidity buffers than most other European countries are embracing. European and U.K. officials have shown a greater willingness than their U.S. counterparts to rein in bankers' pay and target bad behavior with criminal prosecutions. The U.K.'s banking supervisors have also urged some European and U.S. banks to restructure their U.K. operations and have pressured foreign branches of banks from many countries -- from crisis-hit countries like Cyprus to Switzerland and the U.S. -- to stockpile additional funds in their British arms. The different approaches have led to cross-border sniping, with its European Union officials threatening retaliation if the U.S. imposes its rules abroad. Britain's push has led it afoul of European counterparts, who criticize the country's aggressive approach as a violation of the bloc's "single market" rules. U.S. Treasury Secretary Jacob Lew said yesterday that global coordination shouldn't come at the expense of tough rules. Some executives say privately that the discord gives them a chance to delay or water down rules by pitting regulators in different countries against one another. Read more. (Subscription required.)
DID YOU MISS MONDAY'S abiLIVE WEBINAR DISCUSSING § 1111(b) ELECTION, PLAN FEASIBILITY AND CRAMDOWN ISSUES? RECORDING IS NOW AVAILABLE!
If you were not able to join Monday's well-attended abiLIVE webinar examining § 1111(b), a recording of the program is now available for downloading! Utilizing a case study, ABI's panel of experts explored the issues surrounding a lender's decision on whether or not to make an election under § 1111(b), plan feasibility and voting. The abiLIVE panel also walked attendees through the necessary mathematical analyses used to examine these issues. The 90-minute recording is available for the special price of $75 and can be purchased here.
NEW abiLIVE WEBINAR ON AUGUST 20: HOW WILL THE NEW U.S. TRUSTEE FEE GUIDELINES IMPACT YOU?
The new U.S. Trustee Fee Guidelines will affect all attorneys and firms who work on larger chapter 11 cases filed on or after November 1st. ABI's Ethics & Professional Compensation Committee will present a panel of experts, including Cliff White, the director of the U.S. Trustee Program, to discuss some of the ways the new guidelines could change day-to-day operations in firms, issues relating to the new market rate benchmarks, and how these changes might alter insolvency practice. Register today to hear government, attorney and academic perspectives on this important and timely topic.
ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE MID-ATLANTIC BANKRUPTCY WORKSHOP IN AUGUST
The next stop for the ABI Golf Tour is the Hershey Country Club, in conjunction with the Mid-Atlantic Bankruptcy Workshop. Final scoring to win the Great American Cup — sponsored by Great American Group — is based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! There's no charge to register or participate in the Tour.
ABI IN-DEPTH
NORTON JUDICIAL EXCELLENCE AWARD NOMINATIONS OPEN
Nominations are now open for the 8th Annual Judge William L. Norton Judicial Excellence Award, to be presented during the ABI luncheon at the annual meeting of the National Conference of Bankruptcy Judges on Nov. 1, 2013. The award is presented by ABI and Thomson Reuters each year to the current or retired bankruptcy judge whose career embodies the same continued dedication and outstanding contributions to the insolvency community as the award’s namesake, Judge Norton. Nominations are considered by a committee made up of representatives from the Norton treatise and past ABI presidents. Nomination forms are available from Clay Mattson at Thomson Reuters ([email protected]) and should be submitted by July 29.
NEW ABI "BANKRUPTCY IN DEPTH" ON-DEMAND CLE PROGRAM LOOKS AT PRINCIPLES OF PROPERTY OF THE ESTATE: DEMYSTIFYING EQUITABLE INTERESTS
In this 90-minute seminar, Profs. Andrew Kull of Boston University School of Law and Scott Pryor of Regent University School of Law provide an in-depth analysis of a legal principle that has become, in their words, "a long-lost area of the law": § 541 of the Bankruptcy Code. Seeking to demystify what is meant by "property of the estate" and, in particular, the distinction between legal or equitable interests of the debtor in property, Kull and Pryor describe the legal entanglements that ensue when legal title belongs to one person but the equitable title belongs to someone else. The cost of the seminar, which includes written materials and qualifies for 1.5 hours of CLE, is $95. To order or to learn more, click here.
ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!
Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!
NEW CASE SUMMARY ON VOLO: UNITED JOINT VENTURE LP V. NOBLE (IN RE JENNINGS; 11TH CIR.)
Summarized by Lyndel Anne Mason of Cavazos, Hendricks, Poirot & Smitham, PC
The Eleventh Circuit ruled that the chapter 7 trustee's decision to close the estate as a "no asset" estate and not sell or settle a state court's judgment in favor of the debtor was within his business judgment under § 544(a), and the district court deference to that decision was affirmed.
There are more than 900 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: BIG BANKS' WARNINGS ABOUT LEVERAGE RATIO FAIL THE SMELL TEST
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A new blog post finds that the new leverage ratio is a relatively modest proposal that can be easily addressed by affected banks without material capital raises or changes in distribution policy.
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
When will the dowward trend of consumer bankruptcy filings turn around?
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 37 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.
