Much chatter has been made of Ocwen's acquisition of ResCap at the bankruptcy auction (although not as much as the acquirer of its loan portfolio), but I'm much more intrigued by its pickup of Wilbur Ross's Homeward Residential. I get the voracious appetite for servicer expansion, but what's the deal with getting into the origination market? Does this have something to do with Dodd Frank? Was it just a good deal? Or does Wilbur Ross just know when to exit (although it's a part paper transaction, which means he's not really exiting entirely, just acquiring stock). Maybe he's just fed up.
Author: John Pottow
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Ad Hocracy
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A storyline in the AMR bankruptcy is exposing how confusing it's becoming (at least to me) to keep track of negotiating groups in chapter 11. (Here's a good recent story from WSJ.) Gone are the days of the simple Creditors Committee. Now we have Ad Hoc groups of bondholders. While there was some initial dust-up about disclosure requirements when these sorts of groups emerged, that's settled somewhat. What I am now baffled about is the Ad Hoc group in AMR, which does not apparently see eye-to-eye with a non-Ad Hoc ad hoc group of hedge funds. Apparently these funds were invited to join the Ad Hoc group (but declined? why??) and now are complaining that the Ad Hoc group is getting special treatment in negotiations during the exclusivity period. (I wonder how the Creditors Committee feels?)
The broader point that has me head-scratching is why are these groups assembled (presumably for negotiating leverage) and why do they have intra-class divergence along the lines we're seeing in AMR? Is it cultural (don't want to work with certain funds)? Strategic (don't want to be dragged down to USAiways merger by funds with a stake there)? Other?
Speculations welcome, because it all just devolves for me into unhappy recollection of the cliquishness of high school. Splitters!
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Layaway Fees Waived
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We've posted before about Layaway's resurgence after the Great Recession. A new development: gearing up for the holiday season, many major retailers are waiving their layaway fees, and consumers are responding positively. Here's KMart's. Also, embargos on various popular products are now being lifited. This leads me to belive that Layaway's resurrection (in places where it died) may be long-lasting. It seems that spending on layaway items has gone up in response to this campaign, which makes me wonder: is this just another way to drive foot traffic as the payments are made? And if so, is there anything wrong with that? Layaway, it occurs to me, has financing simplicity of the sort that should make the CFBP dance, so if customers like it, and it prevents consumer debt on excessive interest terms, isn't that a good thing?
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Elizabeth Warren & LTV Steel
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A bankruptcy case from the 1990s called LTV Steel has amazingly enough become an issue in the U.S. Senate
race in Massachusetts. A bankruptcy
case! Just this week, Senator Scott
Brown’s campaign released a web ad insinuating that Elizabeth Warren, who worked on the case, somehow fought against LTV Steel’s
employees. The ad demanded to know, “Who
is going to defend her?” Well, given
that Warren’s participation in LTV
was to defend an arcane but important principle of bankruptcy law—that serves
to protect workers—I guess it falls
to bankruptcy academics like us to defend her.
So I accept the invitation. And where better to post than my Blogosphere Alma Mater?The bankruptcy law question at issue in LTV is complex, and I will discuss it in some detail below. But in case nobody reads beyond this
paragraph, I should quickly dispatch one patent falsehood that gave me a
double-take when I viewed the ad. The
video suggests that Warren was somehow trying to make sure LTV’s workers did
not receive retirement benefits. That is
objectively false: the workers’ benefits were covered by a trust fund that was fully solvent at the time of the case. Nobody in good conscience could argue that
Warren was somehow trying to deny workers’ benefits that would be paid from an
already-funded trust. LTV and other
companies were quarreling over how much each of them needed to contribute to that
fund, and Elizabeth Warren only got involved when a federal appellate court
issued a decision in the middle of that fight that proposed a novel (and
troubling) interpretation of the Bankruptcy Code.The full story should dispel the astonishing claim that Warren was
somehow a hired gun who hoped to take benefits away from retirees. Here’s what actually happened. -
It’s Official: Borders Long Goodbye Over
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They officially announced that with no-one showing up to the auction and with their stalking horse backing out (bucking them off?), they will acquiese to the "winning" bid of the liquidators. Surely part of this sad fall — sadder still for this poster from Ann Arbor — comes from missteps that we can see in hindight failed to appreciate the profound transformations in this retail sector over the past decade plus. But part of it too is an insurmountable change in retail trends fueled by the coming of age of online shopping. Yes, Barnes and Noble survives for now, but will they still be a major bricks and morter presence a decade from now? I have my doubts. Sure, there will always be niche needs — just as some travel agents persist in serving corporate clients — so I don't see Aunt Agatha's Mystery Booksore in Ann Arbor going anywhere soon. But the bread-and-butter, consumer travel agency around even still in the 1990s could serve as the example of what's to become the bricks and mortar mega-book store: a close chapter in the U.S. economy.
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Super-Compulsory Counterclaims! Supreme Court Edition
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Greetings, Slipsters. 2011 will bring, alas, my retirement from the blog, although I may occasionally make intermittent guest posts in my emeritus capacity going forward. So what better way to go out than commenting on the Anna Nicole Smith case up at SCOTUS (sub nom. Stern v. Marshall – or Marshall II, since this a return engagement by these parties)? I will explain why CA9 will and should be reversed after the break, although the case is sufficiently complex it may require several postings.
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Reasonably Equivalent Value for Academic Prestige?!
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BearingPoint's Trustee has just brought a fraudulent transfer action to get back a donation it paid Yale of $6 million to endow a chair and earn naming rights of certain on-campus buildings at its School of Management.
(If someone can find a link, please post.)
This academic of course thinks summary dismissal is warranted for the suggestion that they might not have received REV for the honor of having their name used in connection with a prestigious professorship!
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2009 Milestones?
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Any nominations? So much with high-profile items like bailout to choose from, but I like the fact that debit card usage exceeded credit card in Q4 for the first time….
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Senate Hearing on Medical Bankruptcies (Oct. 20, 2009) (Pottow)
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Yes, I went back to D.C. for more congressional bankruptcy brouhaha, this on the rising incidence of medical bankruptcies. C-SPAN decided to broadcast the proceedings in all their glory. Sen. Franken (D-MN) was armed with statistics on Swiss medical bankruptcies — very well prepared, I must say. Here's the video. Hearing Ms. Burns' story about losing her son to cystic fibrosis — and then her financial life — was gut-wrenching. The good news is that Sen. Whitehouse (D-RI) seems motivated to pursue his bill and is gathering increasing support. For those wanting more in-depth analysis, here's my written testimony.
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Amici Bankruptcy Professors Pottow & White “Win” on BAPCPA 11 U.S.C. 522(p)
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Yes, self-serving, but What Is To Be Done?
A few years ago, my Michigan Law colleague Jim White (J.J. White to some) — who has guest blogged for Credit Slips — and I picked up a BAPCPA case trickling though the Ninth Circuit. (OK, I started it and then bugged him about it.) We got together and wrote a brief to file as amici and sent it off dutifully to CA9 back in 2007. Then we forgot about it (even missed oral argument). Until yesterday, that is, when we saw that the Ninth Circuit handed down the decision reversing the bankruptcy and district court judgements that had so exercised us.
Here's the link: Greene v. Savage (In re Greene) (9th Cir. Oct. 2, 2009). Summary follows the break.