|NEWS AND ANALYSIS
JANUARY BANKRUPTCY FILINGS DECREASE 14 PERCENT FROM PREVIOUS YEAR, COMMERCIAL CHAPTER 11s UP 33 PERCENT
Total bankruptcy filings in the United States decreased 14 percent in January from the same period last year, according to data provided by Epiq Systems, Inc. Bankruptcy filings totaled 59,037 in January 2015, down from the January 2014 total of 68,271. Consumer filings declined 13 percent in January 2015 to 56,588 from the January 2014 consumer filing total of 65,347. In addition, total commercial filings in January 2015 decreased to 2,449, representing a 16 percent decline from the 2,924 business filings recorded in January 2014. Total commercial chapter 11 filings, however, were up 33 percent as January 2015's commercial chapter 11 filings increased to 518 from January 2014's 391 filings. Click here to read the full statistical release.
S&P ENDS LEGAL WOES BY PAYING $1.5 BILLION FINE TO U.S., STATES
Standard & Poor's $1.5 billion settlement today will let the world's biggest ratings company move beyond a bruising legal battle over the flawed grades it gave to subprime-mortgage bonds, though at a more painful price than those paid by big banks that assembled those securities, Bloomberg News reported today. S&P, a unit of McGraw Hill Financial Inc., will pay more than a year's profit to settle suits with the U.S. Justice Department, more than a dozen states and the biggest U.S. pension fund, which alleged that the company inflated ratings on the subprime-mortgage bonds at the center of the 2008 financial crisis. S&P sealed the deal without admitting wrongdoing. A $1.375 billion settlement to be split evenly with the Justice Department and 19 states and the District of Columbia caps a rancorous two-year court battle during which S&P accused the Justice Department of cracking down unfairly on the company after its 2011 decision to downgrade U.S. sovereign debt to AA+ from AAA. Read more.
When lawyers for Standard & Poor's traveled to the Justice Department in Washington, D.C., last month, they hoped to settle an array of government lawsuits and extinguish two years of bad blood, but within minutes of arriving, their plan collided with the demands of government negotiators — all 25 who attended, according to the New York Times DealBook blog yesterday. The Justice Department, which accused S&P of inflating the ratings of mortgage investments that spurred the 2008 financial meltdown, sent so many prosecutors to the negotiation that they formed an overflow row behind a conference room table. The Connecticut attorney general, George Jepsen, made the trip to Washington, D.C. — his office was one of the first to sue S&P — as did the attorneys general from Illinois and Tennessee and lawyers from the U.S. Attorney's Office in Los Angeles. While the agencies eventually reached an agreement with S&P — a $1.37 billion settlement announced today — they spent that day in January ticking off their demands, one after another. One condition was personal: Retract your claim that the Justice Department's lawsuit was "retaliation" for S&P's decision to cut the credit rating of the U.S. in the summer of 2011. Read more.
HOUSE HEARING TOMORROW TO EXAMINE THE "FURTHERING ASBESTOS CLAIM TRANSPARENCY ACT"
The House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law will hold a hearing tomorrow at 1 p.m. ET to examine H.R. 526, the "Furthering Asbestos Claim Transparency (FACT) Act of 2015." The bill was introduced on January 26 and looks to amend the Bankruptcy Code to require the public disclosure by trusts established under § 524(g) and quarterly reports that contain detailed information regarding the receipt and disposition of claims for injuries based on exposure to asbestos. For more information on the hearing, including the witness list, please click here.
To read the full bill text of H.R. 526, please click here.
PRIVATE STUDENT LENDERS DRAW CFPB REVIEW OVER DEBT REFINANCING
The Consumer Financial Protection Bureau plans to review loan modifications offered by private student lenders, a business that the agency says has victimized some borrowers with subprime-style debt, Bloomberg News reported on Friday. The bureau wants to know what kinds of refinancing options lenders such as Wells Fargo & Co. and JPMorgan Chase & Co. offer borrowers who have trouble making their regular payments, it announced in a statement on Thursday. "Many consumers have asked why their private student lenders won't make a deal," Rohit Chopra, the CFPB's student loan ombudsman, wrote in a blog post. "After all, if lenders and servicers offered lower payments during a tough time, borrowers could avoid default and lenders could get fully repaid over the long run - a win-win for all." In addition to Wells Fargo and JPMorgan, lenders involved in the private student-loan market include Sallie Mae, Citizens Financial Group Inc., PNC Financial Services Group Inc., Discover Financial Services and SunTrust Banks Inc. The CFPB said it plans to use the information it collects for consumer education and analysis of the market. While the regulator may make some of the data public, it said it won't name specific lenders. Read more.
SMALL BANKS SCORE GAINS IN LIFTING REGULATION
Small banks are scoring big victories in their efforts to relax post-crisis rules by delivering a consistent message to lawmakers and policymakers that they are not the same as large Wall Street institutions, the Wall Street Journal reported today. Since the 2010 Dodd-Frank law ushered in a spate of new regulations, community bankers have fanned out across Washington, D.C., to emphasize the differences between small "Main Street" banks focused on local lending and Wall Street firms that they say are fixated on transaction volume. In conversations with lawmakers, small bankers argue that many of the rules intended to address problems at the big banks are weighing heavily on community banks, impeding their ability to grow, make a profit and lend. Last week, the Federal Reserve and Consumer Financial Protection Bureau moved to relax restrictions on lending and acquisitions for smaller banks, satisfying two hard-fought priorities of the Independent Community Bankers of America, an industry trade group. Read more. (Subscription required.)
COMMENTARY: A SMARTER WAY TO TAX BIG BANKS
President Obama has reanimated the idea of taxing the debt of big banks to help stabilize the banking industry and prevent future financial crises, but the president's bank tax is unlikely to gain traction in the new Congress, according to a commentary in yesterday's Wall Street Journal. The administration argues that the new tax would discourage banks from taking on too much risk by making it "more costly for the biggest financial firms to finance their activities with excessive borrowing." However, similar proposals from the administration in 2010 and last year from former House Ways and Means Chairman Dave Camp also failed to gain legislative traction, and even if it became law, it wouldn't put a sizable dent in bank debt. The existing tax system strongly encourages debt finance, and the proposed new tax will not fundamentally change this, according to the commentary. Read the full commentary. (Subscription required.)
U.S. CONSUMER SPENDING IN DECEMBER WEAKEST SINCE 2009
U.S. consumer spending recorded its biggest decline since late 2009 in December with households saving the extra cash from cheaper gasoline, Reuters reported yesterday. Other data yesterday showed that factory activity cooled in January, suggesting that the economy may have entered the new year on slightly softer footing than had been expected. Nevertheless, upbeat and cash-flush consumers are expected to step up their spending and buoy the economy this year. "The consumer is poised to do well in early 2015. Lower gasoline prices are going to provide a big lift to consumption," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pa. The Commerce Department said that consumer spending, which accounts for more than two-thirds of U.S. economic activity, fell 0.3 percent after gaining 0.5 percent in November and 0.3 percent in October. Read more.
ACB EVENT ON CAPITOL HILL ON FEB. 13 TO FOCUS ON FINAL REPORT OF ABI'S CHAPTER 11 REFORM COMMISSION
The American College of Bankruptcy (ACB) Fourth Circuit will be holding a free program, "Considering ABI's Report on Chapter 11 Reform," on Capitol Hill on Feb. 13. The program will last from 9:30 a.m. to 1:00 p.m. and be located in Room 226 of the Rayburn House Office Building (House Judiciary Committee). Members are invited to attend the discussion by ABI commissioners and bankruptcy experts on the Final Report's treatment of small and medium-sized enterprises (SMEs), 363 sales, valuation and more. For more information and to register, please click here.
ORDER YOUR PRINTED COPY OF THE FINAL REPORT OF ABI'S COMMISSION TO STUDY THE REFORM OF CHAPTER 11!
Order your printed copy of the Final Report of ABI's Commission to Study the Reform of Chapter 11! The 402-page Final Report contains more than 200 discrete recommendations of chapter 11 policy reforms. ABI's Commission to Study the Reform of Chapter 11 was established in 2012 with a mission to study and propose reforms to Chapter 11 of the Bankruptcy Code and related statutory provisions. After months of deliberations, the Commission unanimously adopted this report to provide to Congress. For the special price of $40, you will have all the testimony, studies and figures that went into compiling the recommendations at your fingertips! Click here to order.
NEW ABI LIVE WEBINAR TO EXAMINE "PENSION TENSION" IN RESTRUCTURING
Make sure to save the date for "Pension Tension: Dealing with Plans in the Restructuring World," the new ABI Live Webinar scheduled for Feb. 26 from noon - 1:15 p.m. EST! This webinar, presented by ABI�s Labor and Employment Committee, will address current employee- and labor-related issues in chapter 11 and out-of-court restructurings, including, among other things: (a) whether private equity sponsors may be subject to pension fund withdrawal liability under ERISA in light of the First Circuit�s Sun Capital decision; (b) whether pension plan withdrawal liability is entitled to administrative claim status; and (c) the status of the Pension Benefit Guaranty Corp.'s moratorium on 4062(e) enforcement. Attorneys and other restructuring professionals dealing with the PBGC will learn about current developments in this dynamic and changing area of law that plays an important role in many reorganizations today.
- David R. Seligman (Kirkland & Ellis LLP, Chicago)
- Gregory F. Pesce (Kirkland & Ellis LLP, Chicago)
- James J. Mazza Jr. (Skadden, Arps, Slate, Meagher & Flom LLP, Chicago)
- Craig T. Fessenden (Pension Benefit Guaranty Corp., Washington, D.C.) (invited)
- Theresa Anderson (Pension Benefit Guaranty Corp. Washington, D.C.) (invited)
Click here to register.
NEW CASE SUMMARY ON VOLO: LUCAS V. DYNEGY INC. (IN RE DYNEGY INC.; 2D CIR.)
Summarized by Ferve Ozturk of BakerHostetler
The Second Circuit affirmed the district court's ruling that the appellant lacked standing to opt out of or object to the reorganization plan on behalf of a putative class in a separate securities class action. They likewise affirmed the district court's ruling that because the appellant had opted out in his individual capacity, he lacked standing to pursue his personal objection.
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: INCREASED COMPLEXITY IN CHAPTER 11 CASES BRINGS INCREASED COST
In a series looking at chapter 11 professional fees on the Wall Street Journal's Bankruptcy Beat blog, a recent post found that the increased costs of professionals correlates to a similar rise in the complexity of the restructuring process.
For more on this issue, be sure to read the recommendations in the Final Report of the ABI Chapter 11 Reform Commission.
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