U.S. TRUSTEE QUESTIONS PROCESS OF SELLING BANKS IN BANKRUPTCY
The government's bankruptcy watchdog has called the increasingly popular use of chapter 11 to facilitate sales of floundering banks a "questionable practice," the Wall Street Journal reported today. The objection filed on Tuesday in the case of First Mariner Bancorp pointed to the circumstances surrounding an auction for the company that was conducted by investment firm Sandler O'Neill + Partners. According to the filing, Sandler O'Neill failed to disclose a relationship with one of the bidding parties -- National Penn Bancshares Inc. -- which the filing said was evidence of the problems inherent in this trend. The filing specifically requested that the bankruptcy court not approve more than $54,000 in fees for Sandler O'Neill. "This lack of experience in bankruptcy proceedings is not unexpected, because Sandler O'Neill specializes in bank mergers and acquisitions, and banks are excluded from eligibility for bankruptcy protection," said U.S. Trustee Judy A. Robbins (Region 4) in her objection. "However, there is an emerging trend toward bank-holding-company bankruptcies, which appears to skirt the statutory restriction on affording banks the protections of Title 11. Therefore the quandary presented by Sandler O'Neill's flawed disclosure of connections is one that underscores the questionable practice of using bankruptcy courts to facilitate bank mergers and acquisitions," she said. The case is pending in the U.S. Bankruptcy Court for the District of Maryland before Judge David Rice. During the last several years, many bank-holding companies have filed for chapter 11 bankruptcy, using the bankruptcy sale process to find a new owner for undercapitalized and failing banks. Most of the sales have been successful, causing an increased interest in the assets from investors and other bank-holding companies. Read more. (Subscription required.)
EDUCATION GETS TOP BILLING ON CAPITOL HILL
Lawmakers looking ahead to the November elections are putting renewed focus on education, tackling issues on Capitol Hill this week ranging from expanding charter schools to paying off student loan debt, the Associated Press reported yesterday. Voters rank education high among issues of importance to them, and this week's activities are likely a nod to that. Student loans, the subject of some contentious debate in 2013, are coming up again in both the House and Senate. With the doubling of interest rates looming, Congress last year acted to keep them at low level levels for now -- but linked those rates to the financial markets. Sen. Elizabeth Warren (D-Mass.) on Tuesday filed a bill co-sponsored by more than 20 fellow Democratic senators that would open the door for potentially millions of federal loan recipients to refinance that debt at the same rate as current recipients. Undergraduates, for example, qualify for loans at a 3.86 percentage rate lower than the rate at which many graduates had financed their loans. The bill would also amend the Bankruptcy Code to permit the discharge of private lender debt, as was the case prior to the 2005 amendments. Read more.
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ANALYSIS: AMENDING DODD-FRANK PROVISION FACES LOG-JAM IN SENATE BANKING COMMITTEE
While Federal Reserve Chair Janet Yellen has acknowledged the difference between the banking and insurance businesses, the central bank does not have the legal authority to regulate insurers differently than banks under the Dodd-Frank, according to an analysis yesterday in Congressional Daily. "The Collins Amendment does restrict what is possible for the Federal Reserve in designing an appropriate set of rules," Yellen said earlier this year at a Senate Banking Committee hearing. "So it does pose some constraints on what we can do, and we will do our very best to craft an appropriate set of rules subject to that constraint." In response, Sen. Susan Collins (R-Maine) (the author of the amendment) and Sens. Sherrod Brown (D-Ohio) and Mike Johanns (R-Neb.) have introduced a bill that would exempt insurers from regulation under the provision if their business is regulated as insurance at the state level. Sen. Tim Johnson (D-S.D.), who chairs the Banking Committee, called the Collins-Brown-Johanns bill a "top priority," but wouldn't commit to when the panel would report it out. He shares the view that banking standards should not apply to insurance companies, but he is still reviewing the legislation, a committee aide said. However, the Senate Banking Committee's legislative runway is jammed at the moment as the committee is in the throes of reporting out a bill that would dismantle Fannie Mae and Freddie Mac. Read the full analysis.
ABI IN-DEPTH
NEW CASE SUMMARY ON VOLO: SEPTIMO V. FARMER (IN RE SEPTIMO; 9TH CIR.)
Summarized by Prof. Laura Napoli Coordes of Arizona State University College of Law
The Ninth Circuit Court of Appeals affirmed the U.S. District Court for the District of Hawaii's affirmation of the bankruptcy court's order compelling the chapter 7 debtor to cooperate with the trustee of the debtor's estate regarding the transfer of the debtor's home. The court of appeals held that the debtor may not interfere with the sale of estate property and that the bankruptcy court had properly ordered the debtor to cooperate with the trustee pursuant to 11 U.S.C. § 521.
There are more than 1,300 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: STUDY EXAMINES CLAWBACK POLICIES
A recent blog post took a look at a recent PwC study of 100 large public companies' proxy disclosures from 2009 to 2012 that found that the most common trigger for clawback of compensation is the occurrence of a restatement of financial results.
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
Enforcing pari passu clauses in favor of holdout bondholders by injunction against Argentina will undermine sovereign debt restructurings (NML Capital, Ltd. v. Republic of Argentina).
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