SURVEY: SMALL RATE INCREASES COULD FUEL MORE RESTRUCTURINGS
Corporate restructurings might be rarer these days, but professionals think a small increase in interest rates could change that dramatically, according to the 2014 Outlook Survey of restructuring experts fielded by advisory firm AlixPartners, the Wall Street Journal reported today. Half of the professionals who took part in the survey believe that a two-point or less increase in interest rates could trigger a "significant" increase in restructurings. About 56 percent of those professionals said that they expect the Federal Reserve to taper its "quantitative easing" during 2014, something the Fed itself has hinted at. In terms of what types of businesses might face issues this year, retail was the top vote-getter. Of the 104 senior attorneys, investment bankers, fund managers and other restructuring professionals who answered the survey, 57 percent picked retail as one of the top three industries that will increasingly be facing restructuring. With public companies still finding abundant access to cash, 58 percent of the restructuring professionals said they expect more distressed situations to arise involving private companies than public companies, up slightly from last year. Read more. (Subscription required.)
ABA: CONSUMER DELINQUENCIES FELL IN 3Q 2013
The American Bankers Association said today that U.S. consumer delinquencies dropped sharply in the third quarter of 2013 as the economy grew and the housing market improved, Reuters reported today. Late payments dropped significantly in two home-related loan categories, the bank industry group said. A composite ratio that reflects late payments in eight loan categories, including personal and auto loans, fell 13 basis points during the quarter to 1.63 percent of all accounts, a record low, the ABA said. Consumer delinquencies are expected to hover at low levels as the economy continues to improve, the bank group said. Late payments declined or held steady for nearly all of the categories in the composite ratio during the third quarter, although delinquencies rose for property improvement loans. Read more.
U.S. CONSUMER BORROWING UP $12.3 BILLION IN NOVEMBER
The Federal Reserve said that Americans increased their borrowing in November led by continued gains in auto and student loans, the Associated Press reported yesterday. The Federal Reserve said that consumers increased their borrowing activity by $12.3 billion in November to a seasonally adjusted $3.09 trillion. That is a record level and follows an October increase of $17.9 billion. Almost all of the November increase came from an $11.9 billion rise in borrowing for auto loans and student loans. Borrowing in the category that covers credit cards ticked up only $457.8 million after surging in October. Read more.
ALTERNATIVE LENDERS PEDDLE PRICEY COMMERCIAL LOANS
About two dozen nonbank lenders -- including OnDeck Capital Inc., Kabbage Inc. and CAN Capital Inc. -- lent about $3 billion collectively last year, double the 2012 total, estimates Marc Glazer, chief executive of Business Financial Services Inc., a lender with about $100 million of such loans outstanding, the Wall Street Journal reported on Tuesday. These short-term lenders want to become the go-to financiers for business owners needing quick cash, often $50,000 or less. Biz2Credit, an online loan broker for small businesses, says an analysis of loan applications made in December through its website showed that big banks approved 18 percent of loan applications by its customers in December, while small banks approved 49 percent. Short-term lenders such as Swift and OnDeck typically structure their loans to be repaid in months, not years. To reduce risk, payments are collected daily or weekly, enabling lenders see how loans perform "in real time, as opposed to the wait-and-hope model," says Daniel DeMeo, chief executive of New York-based CAN Capital. Interest rates on such loans can run in excess of 50 percent, on an annualized basis, much higher than on conventional bank loans. Usury laws limiting interest rates generally don't apply to the short-term lenders, and some of the loans are originated in states that don't cap interest rates on commercial loans. Read more. (Subscription required.)
OLDER AMERICANS SHUN RETIREMENT AT 65 FOR RISKY STARTUPS
Older Americans are increasingly shunning retirement to start companies because they see job opportunities as being limited after age 55, don't have enough savings to retire comfortably or want to work for themselves, Bloomberg News reported yesterday. People from ages 55 to 64 started 23.4 percent of companies in 2012, up from 14.3 percent of new entrepreneurs in 1996, according to the Kauffman Foundation's research. About a quarter of Americans between ages 44 and 70 are interested in creating their own company or nonprofit venture, according to November 2011 research by San Francisco-based Encore.org, which studies baby boomers' plans for new careers. The average age of 500 recent applicants for a Florida entrepreneurship program funded in part by the U.S. Labor Department was 51, said Michael O'Donnell, regional project manager for Startup Quest in Fort Lauderdale. Read more.
PENSION DRAG ON EARNINGS MAY REVERSE
Nearly 30 large companies over the past few years have switched to "mark-to-market" pension accounting to make it easier for investors to gauge plan performance, the Wall Street Journal reported today. With the switch, pension gains and losses flow into earnings sooner than under the old rules, which are still in effect and allow companies to smooth out the impact over several years. Companies that switch to valuing assets at up-to-date market prices may incur more volatility in their earnings, but it offers a more current picture of a pension plan's health and its contribution to the bottom line. In 2011 and 2012, that change hurt the companies' earnings, largely because interest rates were falling at the time. But for 2013, it may be a big help to them, accounting experts said, a factor of the year's surge in interest rates and strong stock-market performance. Read more. (Subscription required.)
NEXT WEEK! NEW ABILIVE "BACK TO BASICS" WEBINAR SERIES KICKS OFF WITH A LOOK FINANCIAL STATEMENTS AND OPERATING REPORTS
Send your associates to ABI's "Back To Basics" webinar series, hosted by the Young and New Members Committee, this month. The series will cover the fundamentals of financial statements and operating reports (Jan. 14), using financial documents as evidence (Jan. 21), and hedge funds (Jan. 28). Let a trusted CLE provider help get your associates up to speed. Register for the complete series and get the third webinar free!
ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS
Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.
DETROIT EMERGENCY MANAGER KEVYN ORR TO KEYNOTE ABI'S 32ND ANNUAL SPRING MEETING ON APRIL 25
Kevyn Orr, emergency manager to the city of Detroit, will provide the keynote at the Friday Luncheon at ABI's 32nd Annual Spring Meeting at the JW Marriott in downtown Washington, D.C. The conference, taking place April 24-27, 2014, features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various "tracks," including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. The Annual Spring Meeting offers 18.25/22 hours of CLE/CPE credit, along with ethics credit totaling 3.25/4 hours. In addition, committee sessions will drill down on topics covered in the larger sessions to provide you with the most practical and varied CLE/CPE experience ever. Also featured will be a special half-day optional event sponsored by ABI and the FCBA titled "The Intersection of the FCC and Bankruptcy Law."
Sessions at the 2014 Annual Spring Meeting include:
- 18th Annual Great Debates
- Where the Work Is (and Isn't)
- The Ever-Changing Role of Committees
- Large Complex Trusts: A General Motors Case Study
- Municipal Bankruptcies
- Use of Governmental Assistance Programs in Chapter 13
- The Financial Professional’s Role in Out-of-Court Restructurings and Dissolutions
- Civility in the Restructuring Profession
- Union Contracts
- Student Loan Update
- Social Media: What You Don't Know Can Hurt You
- The § 363 Sale Process from a Transactional Perspective
The conference kicks off with an Opening Reception at the Smithsonian's National Museum of the American Indian, offering a truly D.C. experience. Optional events include a golf tournament at Westfields Golf Club, a Washington Nationals vs. San Diego Padres baseball game and an evening at the Kennedy Center with the National Symphony Orchestra.
NEW CASE SUMMARY ON VOLO: NEWCO ENERGY V. ENERGYTEC INC. (IN THE MATTER OF ENERGYTEC INC.; 5TH CIR.)
Summarized by Eric Lockridge of Kean Miller LLP
The Fifth Circuit ruled that § 363(m) does not moot the appeal of an order determining the nature and extent of a nonbankrupt party's interest in a pipeline system when the § 363 sale was approved subject to a later judicial determination of that interest.
There are nearly 1,200 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: LITIGATION HOLD EXTENDS TO THIRD-PARTY INDEPENDENT AGENTS
The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. Insurance and financial institutions understand the importance of data preservation, but from time to time -- usually in the throes of complex litigation -- the specific requirements of federal and state data preservation laws need to be examined more closely. A recent post takes a look back at the major data preservation cases that affected insurance companies and financial institutions in 2012 and 2013.
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
A debtor may strip liens in a "chapter 20" case.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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