||NEWS AND ANALYSIS
SENATOR RICHARD DURBIN DISCUSSES THE "STUDENT LOAN BORROWER BILL OF RIGHTS" ON LATEST ABI PODCAST
Sen. Dick Durbin (D-Ill.), the Assistant Majority Leader for the Senate and sponsor of S. 1803, the "Student Loan Borrower Bill of Rights," joined ABI Resident Scholar Prof. Charles Tabb for a discussion on key issues surrounding student debt. In addition to an overview and insight into his legislation, Durbin provides his thoughts on the risks to the U.S. if action is not taken to address the student debt crisis. Click here to listen to the podcast.
AMIDST CONTINUED CHAPTER 11 BANKRUPTCY SLOWDOWN, EXPERTS WEIGH FUTURE TRENDS
Corporate bankruptcy activity has declined to an unprecedented and record-breaking low--despite pundit predictions, according to an analysis in Friday's ABL Advisor. BankruptcyData.com's research reveals that current corporate bankruptcy activity, or the unprecedented lack thereof, just up-ended historical chapter 11 benchmarks and pundit expectations as there were zero public filings in the entire month of January 2014. In fact, up until the chapter 11 filing on Feb. 2 of Tuscany International Drilling, the last public company to seek chapter 11 protection (OCZ Technology Group) was in early December -- making this 60-day stretch a quite a dry spell, according to bankruptcy experts. "We were expecting a lot of action on the restructuring and insolvency front, but what we got were fewer chapter 11 filings, especially among middle-market companies," says Jeffrey Testa, a partner at Newark, N.J.-based McCarter & English. Prof. Edward Altman of the NYU Stern School of Business adds, "Yes, it is unusual that chapter 11 public company filings are zero for a full month; usually the median month is about 4-5." Testa details how this unprecedented and unexpected decline came to be: "For every reason there should have been filings, there were factors that minimized them: Lenders have practiced forbearance rather than taking the collateral, and in their eyes, a marginally performing loan can be acceptable for the time being if revenues are covering operations. Filing for protection is seen as expensive, which eliminates the smaller filings and creates a trend toward out-of-court resolution. There's also a growing realization that not every restructuring results in the emergence of a successful, reorganized and ultimately profitable entity." Altman added that he expects "filings to pick up, however, in 2014, especially if liquidity dries up some" due to an escalation of problems in developing countries. Read more.
ANALYSIS: NEW REGULATIONS LEAVE BUYOUT BUSINESS OUT ON THEIR OWN
As banking rules are redrawn, the Volcker rule is forcing financial institutions to shed their buyout businesses, the Wall Street Journal reported yesterday. The rule -- part of the Dodd-Frank law --aims to limit the risks big banks can take with their own capital. Under the rule, approved by five federal financial-regulatory agencies last year, banks have to sharply reduce their stakes in their private-equity units, or shed them altogether, by 2015. Banks piled into the buyout business during the boom years leading up to the 2008 financial crisis, taking part in some of the era's biggest corporate takeovers. JPMorgan Chase & Co. is currently in the process of spinning off One Equity Partners, a private-equity arm. The bank had been the firm's only investor, but won't put money into a new fund that One Equity Partners is raising, and it is exploring a sale of its stake in the buyout shop's existing investments. Goldman Sachs Group Inc. plans to keep its private-equity businesses, but is reducing the amount of capital it holds in existing funds. To comply with a Volcker requirement that funds' names don't evoke those of their parent banks, it is replacing the moniker "GS Capital" with "Broad Street" on new funds. Read more. (Subscription required.)
COMMENTARY: GARLOCK CASE SENDS WARNING TO TORT BAR IN ASBESTOS BANKRUPTCIES
Garlock Sealing Technologies, which is trying to emerge from bankruptcy after a deluge of asbestos claims, took a courageous risk in taking on the tort bar in court, and it now plans to use the information it found in discovery as the basis for a racketeering, fraud and conspiracy suit against four national asbestos plaintiffs' firms, according to an editorial in Saturday's Wall Street Journal. Garlock, a gasket-maker, was forced into bankruptcy in 2010 by a flood of asbestos claims. Plaintiffs' lawyers were insisting that Garlock set aside $1.3 billion for victims of the deadly asbestos-related disease mesothelioma. Last month, Bankruptcy Judge George Hodges instead accepted Garlock's liability estimate of $125 million and roasted the plaintiffs' bar for its dishonesty. Most companies pushed into asbestos bankruptcies have set up trusts to pay claims. Garlock said that it had evidence that plaintiffs were filing claims with trusts in which they blamed non-Garlock products for their diseases, even as they accused Garlock in court. The judge allowed discovery in 15 cases Garlock had already settled, and as the judge wrote, "Garlock demonstrated that exposure evidence was withheld in each and every one of them." Read the full editorial. (Subscription required.)
ANALYSIS: ROLLING THE DICE ON MUNICIPAL BANKRUPTCIES
Moody's Investors Service said in a report last week that the amount of money that bond investors get back in municipal bankruptcies varies widely -- even among creditors who own debt with similar characteristics, the Wall Street Journal reported on Saturday. The report is timely given the situation in Puerto Rico, which has about $70 billion in outstanding debt that is widely owned among U.S. investors. The commonwealth has been downgraded to junk recently by two major rating firms: Moody's Investors Service on Friday and Standard & Poor's Ratings Services earlier last week. Puerto Rico, which has been faced with a struggling economy in recent years, is not eligible for chapter 9 municipal bankruptcy, but it is unclear how bond investors would fare if the island could not pay back its debt. Island officials say that they are working to improve the commonwealth's finances and have assured investors that they will get their money back. Moody's analysts noted that in the bankruptcy case of Jefferson County, Ala., which was weighed down by more than $3 billion in sewer debt, investors who owned sewer bonds got back 54.1 percent of their money. However, J.P. Morgan Chase ended up with a recovery closer to 30 percent. (Moody's did not include in its calculations a fine that J.P. Morgan paid related to a bribery investigation connected to the county's sewer bonds.) Other creditors got as much as 80 percent, Moody's said. Read more. (Subscription required.)
PUBLIC COMMENT PERIOD ENDS SATURDAY FOR PROPOSED AMENDMENTS TO THE FEDERAL RULES OF BANKRUPTCY PROCEDURE
The Judicial Conference Advisory Committee on Bankruptcy Rules has proposed amendments to the Federal Rules of Bankruptcy Procedure and Official Forms, and requested that the proposals be circulated to the bench, bar, and public for comment. On August 15, 2013, the public comment period opened for the proposed amendments to Bankruptcy Rules 2002, 3002, 3007, 3012, 3015, 4003, 5005, 5009, 7001, 9006, and 9009 and Official Forms 17A, 17B, 17C, 22A-1, 22A-1Supp, 22A-2, 22B, 22C-1, 22C-2, 101, 101A, 101B, 104, 105, 106Sum, 106A/B, 106C, 106D, 106E/F, 106G, 106H, 106Dec, 107, 112, 113, 119, 121, 318, 423 and 427. The public comment period closes on February 15, 2014. For more information, please click here.
To access the online comment site for the proposed amendments, please click here.
DUBERSTEIN GALA AWARDS DINNER ON MARCH 3 TO PAY TRIBUTE TO BANKRUPTCY JUDGE BURTON LIFLAND AND CHIEF BANKRUPTCY CLERK JOSEPH HURLEY
The Gala Awards Dinner at this year's 22nd Annual Duberstein Bankruptcy Moot Court Competition on March 3 will feature a special tribute to Bankruptcy Judge Burton J. Lifland of the U.S. Bankruptcy Court for the Southern District of New York and Joseph P. Hurley, Chief Bankruptcy Clerk (retired) of the U.S. Bankruptcy Court for the Eastern District of New York. To purchase tickets for the gala or to find out more information, please visit http://www.dubersteingala.com.
PURCHASE EITHER THE CONSUMER OR BUSINESS EDITION OF THE BEST OF ABI 2013 AND RECEIVE A FREE ADDITIONAL TITLE!
To make room for new books in 2014, ABI is having a special Bookstore clearance sale. Now, when you buy either Best of ABI 2013: The Year in Business Bankruptcy or The Year in Consumer Bankruptcy, you can choose a free book from a select list of ABI publications. You'll be able to make your selection when you click "Buy Now" on either edition of the Best of ABI 2013. To purchase the Best of ABI 2013: The Year in Business Bankruptcy, please click here.
Make your selection when you click "Buy Now" on either edition of the Best of ABI 2013. To purchase the Best of ABI 2013: The Year in Consumer Bankruptcy, please click here.
ABI'S SIXTH ANNUAL LAW STUDENT WRITING COMPETITION DEADLINE APPROACHING
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.
LOOKING FOR A REPLAY OF THE "BACK TO BASICS" WEBINARS? CHECK OUT ABI'S CLE SITE!
The final installment of ABI's "Back to Basics" live webinar series, hosted by the Young and New Members Committee, was held last week, and you now have the opportunity to access the programs at your convenience! The three webinars in the series, an examination of financial statements and operating reports, using financial documents as evidence and issues surrounding bankruptcy and hedge funds, are now posted to ABI's e-Learning website. Let a trusted CLE provider help get your associates up to speed.
LOOKING TO SEE WHAT IS IN STORE FOR ABI'S 32ND ANNUAL SPRING MEETING? WATCH HERE!
NEW CASE SUMMARY ON VOLO: JONES V. MULLEN (IN RE JONES; 9TH CIR.)
Summarized by Kevin M. Baum of St. John's University School of Law
The Ninth Circuit BAP affirmed the bankruptcy court's order approving the chapter 7 trustee's sale of real property transferred to the debtor post-petition upon the death of the grantor under a beneficiary deed under Arizona Law, which had been executed and recorded pre-petition. Particularly, the BAP held that the debtor's contingent interest in the real property under the beneficiary deed was property of the estate under 11 U.S.C. § 541(a)(1).
There are more than 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: ATTACKING LBO PAYOUTS AS STATE LAW FRAUDULENT TRANSFERS
The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent post examines the U.S. Bankruptcy Court for the Southern District of New York's recent decision in Weisfelner v. Fund 1 (In Re Lyondell Chemical Co.), 2014 WL 118036 (Bankr. S.D.N.Y. Jan. 14, 2014). The court held that the safe-harbor provision of 11 U.S.C. § 546(e) did not bar unsecured creditors from seeking, under state fraudulent-transfer law, to recover payouts made to former shareholders of a company acquired in a leveraged buyout.
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
The Bankruptcy Code permits a debtor to artificially impair a class for cramdown purposes.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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