New Legislation Aims to Protect Veterans' Disability Benefits in Bankruptcy

The Honoring American Veterans in Extreme Need (HAVEN) Act was introduced yesterday seeking to create parity in bankruptcy cases for benefits provided by the VA and Department of Defense to disabled veterans and their surviving spouses, the Military Times reported. Sen. Tammy Baldwin (D-Wis.) and Sen. John Cornyn (R-Texas) introduced the bill, which has already been endorsed by 10 Republican and 10 Democratic senators. When a disabled vet declares bankruptcy currently, the law allows debtors to count a veteran’s disability benefits as disposable income, allowing them to seize the benefits. However, Social Security disability benefits are exempted by law from being lumped into a person’s disposable income in bankruptcy filings, and disability benefits in any form aren’t taxable and therefore generally not considered disposable income. “Right now, veterans and their families are forced to dip into their disability-related benefits to pay off bankruptcy creditors,” Baldwin said. Baldwin and others involved with the HAVEN Act say the bill could also help veterans’ mental health issues by easing their financial burdens. Bankruptcy John H. Thompson, a veteran and member of ABI's Veterans Affairs Task Force, brought up “startling statistics” surrounding veteran suicides. “We know that one of the single greatest contributing factors to that is financial distress,” he said. “And this is going to go a long way [toward] easing that financial distress for many American veterans.”



For more information on the HAVEN Act, please click here.

To read the full bill text, please click here.

For more on this issue, be sure to read this November ABI Journal article or listen to this special ABI podcast.

Illinois Rep. Seeks to End Executive Bonuses During Corporate Bankruptcies

U.S. Rep. Cheri Bustos (D-Ill.) is joining a bipartisan group of legislators to ban executives from receiving bonuses after their companies declare bankruptcy, week.com reported. Bustos’s bill, the No Bonuses in Bankruptcy Act of 2019, would bar companies from paying bonuses to employees making more than $250,000 a year while they are going through the bankruptcy process. The bill would also ban employee relatives, board members, general partners or insiders at affiliate corporations from receiving bonuses while the bankruptcy case is ongoing. “Wealthy corporate executives and insiders shouldn’t be able to cash out during a bankruptcy while workers are laid off and struggle to pay the bills,” Bustos said. The bill was inspired by high-profile cases, such as Toys “R” Us and RadioShack.

Pimco, Elliott Lead Distressed-Debt Heavyweights in PG&E Faceoff

Some of the biggest players in distressed debt have banded together in PG&E Corp.’s bankruptcy to press their case for repayment of about $12.5 billion, Bloomberg News reported. Topping the list is bond giant Pacific Investment Management Co. with about $2.7 billion in PG&E debt, and Elliott Management Corp., which holds $1.2 billion in debt and a mix of long and short positions in the utility’s stock, court records show. That makes them the biggest players in a group of 24 investors and part of the senior unsecured noteholders' committee. Their presence foreshadows some hard-fought battles over who gets what in the bankruptcy process, which analysts have said could last two years or more. Besides Elliott, which is led by billionaire Paul Singer, the group includes firms such as Howard Marks’s Oaktree Capital Management and Leon Black’s Apollo Global Management LLC that have long track records of dealing with troubled companies and complex litigation. The group has been aggressive early in the biggest-ever bankruptcy by a U.S. utility, fighting against proposed debt-trading restrictions sought by PG&E and inserting itself in a battle between the power company and federal regulators.

Regulators Move to Ease Post-Crisis Oversight of Wall Street

Federal regulators moved on Wednesday to ease oversight of the country’s largest banks and other financial firms, continuing a push by the Trump administration to reverse rules that were put in place following the 2008 financial crisis, the New York Times reported. The Federal Reserve said it would adjust the structure of its annual “stress tests,” which measure the ability of leading banks to withstand a potential economic or financial storm. The changes are likely to make it easier for banks to get regulatory approval to pay higher dividends or buy back their own shares. Separately, a federal oversight panel announced that it planned to no longer designate big non-bank financial institutions — insurers, asset-managers and the like — as “systemically important.” The classification subjected such firms to more intrusive government regulation. Taken together, the announcements yesterday represented a big win for the financial industry, which has been arguing since the Obama administration that a flurry of regulations imposed following the financial crisis were onerous and made it harder for banks to make loans and support economic growth. Bank executives also argue that because the industry is financially much stronger than it was a decade ago, many recent regulations are now unnecessary.

Commentary*: Delaware Hedge Fund Tussle Puts Efficient-Market Hypothesis in Spotlight

Sophisticated hedge funds are turning in ever-greater numbers to Delaware’s courts to deploy “appraisal rights,” a once obscure legal remedy that gives shareholders of companies incorporated in the East Coast state the right to challenge the price of M&A transactions, according to a commentary in the Financial Times on Friday. Given that the majority of U.S. companies are incorporated in Delaware, the state’s judiciary has been busy. In a handful of cases, Delaware judges have agreed with dissenting shareholders that a company was not sold at fair value. The judgments have triggered windfalls for a breed of specialist hedge funds engaging in what is known as “appraisal arbitrage,” with more than $1 billion flowing to them. The trend has seen judges hold an increasing number of trials over disputed M&A valuations, sending those draped in black robes on a crash course in equity betas, market-risk premiums and other textbook esoterica. One judge in a high-profile valuation ruling made a math error that required a correction. Another pointed out in a ruling that the necessary financial “formulas did not spring from the mind of this judge, softened as it has been by a liberal arts education.” But this burst of number-crunching by Delaware’s judiciary may soon become nothing more than an historical oddity. On March 27, the Delaware Supreme Court is set to deliberate on a case in which hedge fund Verition Partners is appealing a ruling by a Delaware lower court judge on Hewlett-Packard’s $3 billion acquisition of Aruba Corp. in 2015. The judge, Vice Chancellor Travis Laster, shocked observers by ruling that the fair value for Aruba was just $17.13 a share, less than the $24.67 a share Hewlett-Packard had agreed to pay.



*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The World’s Last Blockbuster Store Has No Plans to Close

The second-to-last Blockbuster in Western Australia will stop renting videos on Thursday and shut down for good at the end of the month. Two stores in Alaska, part of the final group of Blockbuster outlets in the U.S., closed in July. That will make the Blockbuster in Bend, Ore., a one-of-a-kind corporate remnant, the New York Times reported. The company filed for bankruptcy protection in 2010, shriveled from 9,000 to 300 stores, then mostly closed. But other bankrupt companies have holdout locations as well. Some Tower Records stores still thrive in Japan long after its parent company declared bankruptcy and closed all of its American stores. There is a Howard Johnson’s in Lake George, N.Y., that is the lone survivor of what was once the country’s largest restaurant chain. Such holdouts have bucked the norm in the retail and restaurant industries, which have shed stores by the hundreds in recent years. The roll call of closings continued Wednesday, with discount retailer Dollar Tree’s announcement that it would close up to 390 Family Dollar locations this year. As of mid-February, retailers had announced 2,187 store closings in the United States this year, according to Coresight Research.



Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store.

American Homeowners and Their Insurers Face a Flooding Crisis from Within

Old pipes and valves, worn-out hoses on second-story washing machines, and faulty connections for a proliferation of water-using appliances are causing a surge in increasingly expensive damage reported to insurers, the <em>Wall Street Journal</em> reported. The increase has occurred even as many other types of claims — including fire — have declined in frequency, according to industry figures. One in 50 homeowners filed a water-damage claim each year between 2013 and 2017, the latest data analyzed by Verisk Analytics’ ISO insurance-analytics unit. It crunches industry data on a five-year rolling basis. The 2.05 percent frequency rate is up from 1.44 percent annually between 2005 and 2009. The bottom line is a $13 billion water-damage bill for homeowners’ insurance companies in 2017. Claims average about $10,000, ISO says. The increase in overall claims is due partly to aging homes. A postwar building boom in the 1950s gave way to other booms, meaning much of America lives in houses that are decades old and are becoming likelier candidates for plumbing failures. Even homes built during the real estate bubble of the early 2000s can generate claims, as they often have far more appliances with water connections, boosting leak possibilities.

Annual Spring Meeting Spotlight: Survey the Changing Landscape of D.C. at Bob Woodward's Keynote

You won't want to miss legendary journalist and author Bob Woodward as he keynotes ABI's Annual Spring Meeting. Want to find out more? Watch this video: 



ABI's ASM this April features 30 sessions with expert speakers analyzing important bankruptcy cases and issues. ABI's Commission on Consumer Bankruptcy will release their final report of recommendations to improve the consumer bankruptcy system. A live broadcast of “Eye on Bankruptcy” will examine the national security implications of foreign exfiltration of high-tech assets through bankruptcy. These are just some of the many reasons to join us at ASM. Register here.

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