The Third Circuit has long been perceived as the most efficient, and perhaps most filer-friendly, when it comes to corporate bankruptcies. Perhaps it's why the district is seen as the most likely choice for filings. However, the latest numbers from the U.S. Bankruptcy Courts note that business filings coming from the district place it only in third among the 11 districts.

Chapter 11 bankruptcy filings throughout the nation declined by more than 10% during a one-year period between the end of March in 2012 and this year. The total now sits at 9,811, down from March 2012’s 11,339. The total of all types of bankruptcies also dropped by more than 10% to 1.17 million. Still a tiny percentage overall, Chapter 9 (municipal bankruptcy) filings increased to 20 between March 2012 and March 2013 from 13 during the previous 12 months.

Within the numbers, the Ninth District (West Coast) far and away had the most filings for the period at 2,418, down significantly from the 3,188 last year. It was followed the Eleventh Circuit (FL, GA, AL) with 1,288 and the aforementioned Third Circuit (located in Delaware and including NJ and PA) at 1,213. The lowest total of filings, excluding Washington, D.C., came out of the Eighth District (AR, IA, MN, MO, NE, ND, SD) with just 317.

-Brian Shappell, CBA, CICP, NACM staff writer

Less than one year after its lavish opening, Revel AC Inc. has made official its filing for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Camden, NJ. The filing, heavily rumored since last month, was made following a debt-for-equity swap agreement for which secured lenders signed off. The bankruptcy hearing is tentatively slated for mid-May.

Revel, featured as a potential filer just days after NACM’s “Industries to Watch” series highlightied the potential problems that could be caused by a glut of gaming operations in the Eastern United States, saw rumors spread like wildfire that the operator of Atlantic City’s Revel casino/resort property sought high-powered attorneys specializing in bankruptcy filings to look at its finances. Such finances already include $1.5 billion of debt and just over $1 billion in assets at a time when economic growth seems to be easing, in addition to more competitors in neighboring states coming online with legalized gaming operations and the budgets of potential local customers still impacted by the lingering effects of Hurricane Sandy.  

Patrick Spargur, ICCE, credit and collections manager with Bally Technologies, Inc. speculated there could be two or three filings on the part of Atlantic City-based operations alone this year. Creditors selling directly to or downstream from Eastern-based gaming operations in any significant capacity need to be aware of the potential trend.  

-Brian Shappell, CBA, NACM staff writer

Despite a pair of noteworthy increases near year's end, 2012 closed with commercial bankruptcy filings at their lowest total since the 2008 financial crisis.

According to data provided to the American Bankruptcy Institute (ABI) by Epiq Systems, Inc., there were 57,788 total commercial bankruptcies during calendar year 2012, a 22% drop from the 74,415 filings during the same period in 2011. Chapter 11 filings also fell in 2012, as the 7,760 filings marked a 10% decrease from the 8,658 Chapter 11 filings in 2011.

Filings fell in the consumer world as well, as the 1,127,540 total noncommercial filings during 2012 represented a 14% drop from 2011's noncommercial total of 1,305,243. Combined, there were 1,185,328 total bankruptcy filings for calendar year 2012, which marks another 14% decrease from the 1,379,658 total filings in 2011.

In December 2012 alone, there were 3,739 commercial filings, 33% lower than the 5,569 filings during the same period in 2011. Chapter 11 filings registered a 25% drop with 742 filings in December 2011 compared to only 559 last month.

The per capita filing rate for calendar year 2012, measuring total filings per 1,000 population, decreased to 3.83, down from 4.46 in 2011. States with the highest filing rates through 2012 were Tennessee (6.88), Nevada (6.43), Georgia (6.43), Alabama (5.84) and Utah (5.76).

Read more about what to expect from bankruptcies in 2013 in this week's upcoming edition of NACM's eNews.

- Jacob Barron, CICP, NACM staff writer

As expected, unsecured creditors will get pennies on the dollar at best if the initial proposal for Solydra’s freshly filed reorganization plan is adopted (eventually) in anything resembling its present form by a U.S. Bankruptcy Court judge.

Solyndra, which announced it was seeking Chapter 11 protection in September amid a declining solar market during recession, high overhead, foreign competition and accusations of fraud; has filed its reorganization plan in a way many companies do when insolvency strikes: in the Third Circuit/Delaware Court. It has long been perceived that said court, based in Wilmington, is the most bankruptcy-friendly in the nation. In the plan, the controversial Solyndra would end up paying out a maximum of 6% of what it owes to unsecured creditors, and that is if proceedings go smoothly. Remember: lengthy court battles which have been prevalent in high-profile cases of late could only draw more funds from the overall pot, and reduce that estimate.

Solyndra, a solar energy company with deep ties to the Obama Administration fundraisers, still is being investigated for fraud. The California company had at one point received more than one-half-billion-dollars in government loan guarantees and was noted by Obama political enemies for its palatial offices.

It’s one of more than a half-dozen filings in the last year by overleveraged alternative energy companies, which was predicted in NACM’s Business Credit Magazine in spring 2011. Producers have alleged that Asian competitors have been offered subsidies by their governments and can no longer compete because they are undercutting them so drastically on pricing and costs. Others note a major factor is oversaturation in the U.S. solar energy/products manufacturing industry, which saw rapid and perhaps unsustainable interest during the waning days of the last economic boom.

-Brian Shappell, CBA, NACM staff writer

The Obama Administration and campaigners working to ensure a second term for the Democrat have often invoked Mitt Romney’s “Let Detroit Go Bankrupt” headline/soundbyte to hit at the Republican nominee’s presidential campaign. Now, the Romney campaign has rung the bell for Round 2 by turning a bankruptcy headache tied to President Barack Obama into a public counterstrike.

Romney went on the attack this week with allegations of ”crony capitalism” over the failure of Solyndra, a solar energy company with deep ties to the Obama fundraisers now being investigated for fraud and in the midst of a Chapter 11 case filed in September. Solyndra had received more than one-half-billion-dollars in government loan guarantees which, along with its palatial offices, were at the center of Romney’s ire. The Solyndra bankruptcy filing, the FBI raid at its headquarters and ongoing investigations levied a PR hit to the Obama Administration. In the wake of the auto bankruptcy debate Obama and other politicians have used against Romney during campaign season, the GOP candidate is trying to turn the tables with insolvency, similarly, as the centerpiece of the counter-effort.

Romney has been bashed regularly, including by some Obama campaigners, for the self-penned 2008 New York Times headline "Let Detroit Go Bankrupt." Romney criticized Obama for the proposed bailouts of Chrysler and General Motors, which most labeled at least somewhat successful, noting a burden on taxpayers as a key critique. Romney's point was about ways to better manage the bankruptcies to improve business prospects for the long-term health of the companies with no suggestions of liquidations which would have caused millions to lose their jobs. The additional gist of Romney’s later arguments was that the president had acted in some ways on his publicly-offered advice. Still, the headline has stood out in campaign soundbytes over the depth of Romney’s point in the piece, which some argue still wouldn’t have been successful without government financial involvement during the downturn. The issue also was used by Romney’s GOP primary opponents with some success in Ohio and Michigan, though Romney managed to eke out wins in both.

However, that story has taken a significant backseat to Solyndra upon Romney’s newfound focus on the administration embarrassment.

-Brian Shappell, CBA, NACM staff writer

The Chapter 11 filing of Adelphia Communications Corp. was marred by disputes between creditors over how each would be paid. As far as the company, formerly the fifth-largest cable company in the U.S. before filing its case in 2002 as a result of internal corruption, was concerned, drastic measures were necessary.

An article in the May 2012 edition of the American Bankruptcy Institute (ABI) Journal discusses the "troubling precedent" set by Adelphia when it took an unorthodox step to shore up support for its reorganization plan: the debtors agreed to pay certain creditors their attorneys' fees if the creditors dropped their objections to the plan. "The Adelphia decision surely resulted from a genuine desire to conclude a contentious and difficult bankruptcy case under an unusual set of factual circumstances," said author John Sheahan, a trial attorney in the Office of the General Counsel in the Executive Office for U.S. Trustees, "but the practice of paying a creditor’s attorneys’ fees in exchange for plan support could quietly become more widespread after Adelphia."

In late 2010, the U.S. Bankruptcy Court for the Southern District of New York issued a decision on the payment of non-fiduciary professional fees in Adelphia. The court allowed a number of distressed investors to be reimbursed for legal fees and other expenditures spent in competing for larger recoveries from the debtor's estate. Adelphia's confirmed plan included a provision that paid the legal fees of certain creditors who had settled their plan objections, and that the court approved the fees without requiring these creditors to prove that they had made a substantial contribution to the estate.

This departs from case law and a more literal interpretation of the statute because Section 503(b)(4) of the Bankruptcy Code permits the court to award "reasonable compensation" to the attorneys or accountants of entities who make substantial contributions to the case is specified ways, as long as they can prove such contributions. "The court reasoned that Section 503 'is [not] the only way' that professional fees can be paid by the estate and relied on a little-used provision of Chapter 11 to support its ruling: Section 1123(b)(6)," which Sheahan noted was "a catch-all clause authorizing plans to contain 'any other provision not inconsistent' with the Bankruptcy Code."

Though Sheahan noted that Adelphia was an especially unique and contentious case, and that the U.S. Trustee Program officially views the decision as one that should be conservatively applied in the future, the precedent set by such a "you support my plan, I'll pay your attorneys" approach could be troubling down the road. "Whatever the merits of this highly case-specific approach in Adelphia, it provides little guidance and less certainty in future cases that may follow Adelphia's precedent," he said.

To find out how to obtain a full copy of Sheahan's article, click here.

Jacob Barron, CICP, NACM staff writer
 

Corporate bankruptcies experienced a freefall in April, far outpacing the decline reported on the part of individuals/consumers.

Statistics prepared by Epiq Systems Inc. in accordance with the American Bankruptcy Institute found total bankruptcy filings dropped 16% from the same period last year. However, the numbers indicated commercial filings fell 25% to 5,132 for the month on an annual basis and by 9% between March and April.

“Businesses continue to cut costs to improve their financial stability,” said ABI Executive Director Samuel J. Gerdano. “As businesses remain committed to bolstering their balance sheets, bankruptcy filing rates will continue to decrease.”

However, some bankruptcy experts like Bruce Nathan Esq., of Lowenstein Sandler PC, aren’t convinced that a downward trend in bankruptcy is a situation with which creditors should become too cozy.

“Even as the economy improves, a lot of companies are going to be dealing with debt walls on debts pushed out to 2013 and 2014 by banks,” said Nathan. “I can safely predict that the trend of a decrease in filings will not last forever. Chapter 11 will increase again soon.”

Brian Shappell, CBA, NACM staff writer

The U.S. Bankruptcy Court located in Delaware recently got over being the venue for some high-profile bankruptcy cases. And though bankruptcy filing levels appear to be on a significant downswing, the court in the first state of the union will hear a pair of cases likely to gain their own widespread attention in the mainstream media.

“Pink slime” became a new phrase in the lexicon of America’s consciousness followed by fast-spreading stories, which gained intense notoriety through social media sharing, of the use of chemical-laden meat additive used widely by restaurants, especially fast food outfits. The public backlash caused a drastic reduction in orders and, thus, those in the meat additive industry are struggling.

As such, the first industry Chapter 11 bankruptcy filing—not expected to be the last—comes from AFA Foods, which cited media coverage and its impact on sales to explain an inability to pay debts owed to secured and unsecured creditors. Even the case’s judge, Mary Walrath, has expressed skepticism in its reorganization prospects. It has been reported that a quick company sale might be the most optimistic option.

From processed meat to another troubled industry, solar products development, yet another in a spate of filings came this week. Solar Trust of America LLC, began having liquidity problems stemming largely from issues at parent company Solar Millennium AG. The parent company, based in Germany, was trying to sell Solar Trust but could not finish the deal before filing its own bankruptcy in Europe.

The case is significant because Solar Trust owns development rights to the world’s largest solar power project, the Blyth Solar Power Project, in California. Just one year ago, it garnered a conditional loan from the U.S. Department of Energy exceeding $2 billion, almost ensuring the Republican Party will dredge up the issue as the presidential election approaches. The Obama Administration is still recovering from the hit it took when Solyndra, a company with deep ties to President Barack Obama being investigated for fraud, filed bankruptcy months ago. More than a half-dozen other solar-related companies have filed for some form of bankruptcy protection since late last summer, most of which tied to oversaturation in the U.S. market and an inability to compete on price with Asian manufacturers of solar products.

Brian Shappell, CBA, NACM staff writer
 

Yet another alternative/renewable energy firm has sought bankruptcy protection following a period of quiet that was preceded in late 2011 by a slew of high profile Chapter 11 filings at such companies.

Michigan-based Energy Conversion Devices voluntarily filed a petition for Chapter 11 protection in the U.S. Bankruptcy Court for the Eastern District of Michigan Tuesday. Energy Conversion Devices, through its subsidiary United Solar Ovonic (USO), manufactured and sold photovoltaic products used largely in commercial rooftop solar panels. The company plans to sell USO, among other assets, as part of its plan to reorganize.

“We firmly believe there is a strong and sustainable commercial market for solar products,” said President/CEO Julian Hawkins. “However, our current capital structure and legacy costs are preventing USO from making the investments necessary for the future of the bodiless without restructuring.

It’s the latest in a series of filings by overleveraged alternative energy companies, which was predicted in NACM’s Business Credit Magazine last spring. Producers have alleged that Asian competitors have been offered subsidies by their governments and can no longer compete because they are undercutting them so drastically on pricing and costs. Others note a major factor is oversaturation in the U.S. solar energy/products manufacturing industry, which saw rapid perhaps unsustainable interest during the waning days of the last economic boom. Prior to Energy Conversion Devices, Stirling Energy Systems Inc. was the most recent to file – but it went straight to Chapter 7 (liquidations) in U.S. Bankruptcy Court in Delaware. It followed previous filings by SpectraWatt Inc., and the controversial Solyndra, a California firm with ties to the Obama Administration still being investigated federally for fraudulent business practices. Months before, BP solar operation halted its Maryland-based solar activities in favor of relocation abroad.

Brian Shappell, NACM staff writer

While bankruptcies are declining nationwide, they don’t seem to be falling anywhere faster  than in the commercial world.

Total business filings for January 2012 fell by 20% when compared to January 2011, from 6,203 to 4,967, according to the American Bankruptcy Institute (ABI). Overall, filings in the U.S. decreased by 14%, totaling 87,946 last month, as compared to 102,175 the year prior.

“The continued decline in bankruptcies reflects the effort of consumers and businesses to shore up their debt loads in order to navigate through an uncertain economy,” said ABI Executive Director Samuel J. Gerdano. “We expect overall bankruptcy levels in 2012 to continue to trend downward until consumers increase household spending.”

Month to month, the January 2012 overall readings represented a 9% decrease from the 96,264 filings in December 2011, and a 10% drop from the 5,496 commercial filings in December 2011. ABI cautioned, however, that Chapter 11 filings in the busiest bankruptcy jurisdictions have been up significantly over the last year, increasing by 40% in the District of Delaware and by 25% in the Southern District of New York. Two major Chapter 11 cases—Eastman Kodak and Ener1, Inc.—were filed in New York last month, while three major cases—Evergreen Energy, Inc., Buffets Restaurants Holdings and Trident Microsystems, Inc.—were filed in Delaware.

Jacob Barron, CICP, NACM staff writer

The Supreme Court announced that, in light of a ruling that conflicts with two previous ones from other bankruptcy courts, it will consider the following situation: “whether a debtor may pursue a chapter 11 plan that proposes to sell assets free of liens without allowing the secured creditor to credit bid, but instead providing it with the indubitable equivalent of its claim under Section 1129(b)(2),” likely this Spring. In essence, it will decide whether or not creditors can use what is owed to them instead of cash in the bidding process for assets. A final ruling on credit bidding would likely follow by about three months.

The Supreme Court noted that a Seventh Circuit Court of Appeals in Chicago case (RadLAX Gateway Hotel LLC v. Amalgamated Bank, 11-166) allowed a secured creditor to bid its claim in lieu of a cash bid. That directly conflicts with a pair of other cases including a Third Circuit decision in Delaware was in the bankruptcy case of Philadelphia Newspapers LLC.

Meanwhile, on the municipal bankrupcty front, the Harrisburg, PA Chapter 9 saga started increasingly resemble "Keystone Cops" as the city council's attorney missed a deadline to appeal a judge's dismissal of its bankruptcy filing.  U.S. Bankruptcy Judge Mary France rejected an appeal by the city council’s attorney, over her previous decision to disallow a municipal/Chapter 9 bankruptcy filing coming from the state’s capital city.  France rejected the infamous Chapter 9 filing, done largely because of runaway debt tied to a trash incinerator project, last month on grounds that the city council was not legally authorized to file it.

And, in Jefferson County, creditors tied to its Chapter 9 filing from the Fall have asked to have the case dismissed, similarly to Harrisburg, on the argument that its county commissioners were not authorized to do so. U.S. Bankruptcy Judge Thomas Bennett is charged with considering the motion to dismiss on what amounts to technicalities in the filing’s legitimacy. 

(Editor's Note: more on these and more bankruptcy stories in this week's eNews, being released late Thursday afternoon).

Brian Shappell, NACM staff writer

Judge James Peck of the U.S. Bankruptcy Court for the Southern District appeared almost relieved as he approved the latest plan by Lehman Brothers, which filed the largest Chapter 11 bankruptcy filing in U.S. history about three and a half years ago. Marked by its size, drastically different plans and legal wrangling between creditors, Peck characterized the bankruptcy proceeding as the most difficult ever seen in U.S. courts.

Lowenstein Sandler PD attorneys Bruce Nathan, Esq. told NACM the case represented “Chapter 11 at its best -- Bankruptcy is at its best not when there is litigation, but when there is resolution, and this case was very difficult.” However, he also noted that, just because the plan has been approved and stakeholders have stopped fighting, doesn’t mean the Lehman situation is coming to a neat and tidy end in 2011. He warned there are still significant amounts of assets that need to be liquidated over a three-year period, which is being drawn out to maximize value as opposed to most of the rapid-fire liquidations that occurred as well as  partnerships/ventures Lehman needs to get out of and a two-year window for stakeholders to file objections to claims to what may end up as a pool of money estimated at $65 billion.

“This is the end of the beginning, but there’s really a lot more to go here,” Nathan implored. “What they’ve done is extrordinary, but there’s a lot of bull work to do to finish this case out.”
That said, there has been an active trade claims market for Lehman creditors to consider. The question now is how many creditors sold their claims, and who should consider doing so at this point. “Selling might make sense given how much longer there is to go,” said Nathan.

(Note: More on this story in this week’s eNews, which will be available at www.nacm.org late Thursday afternoon).

Brian Shappell, NACM staff writer

American Airlines filed for bankruptcy protection this morning, taking the road that many of the company’s competitors have taken in years prior.

AMR Corp., the holding company of American Airlines, and AMR Eagle Holding Corp., the holding company of American Airlines’ regional carrier, American Eagle, filed their Chapter 11 petitions this morning in the U.S. Bankruptcy Court for the Southern District of New York, despite the fact that both are headquartered in Fort Worth, TX. In a release, AMR’s Board of Directors noted that the filing would hopefully allow the company to achieve a cost and debt structure that is industry competitive, thereby assuring its long-term survival.

According to AMR’s most recent quarterly balance sheet, the company has $24.72 billion in assets and $29.55 billion in liabilities. It also has $4.1 billion in unrestricted cash and short-term investments, which the company said should be enough to ensure that vendors, suppliers and other business partners will be paid timely and in full for goods and services provided during the reorganization according to terms. AMR’s cash position also suggests that debtor-in-possession financing is neither considered necessary nor anticipated.

In an FAQ for suppliers and trading partners, AMR was mum on what sort of payment unsecured creditors could expect to see on their pre-petition claims. “It is impossible to predict before approval of the plan of reorganization how much holders of general unsecured claims will receive,” said the company. However, AMR also filed a separate motion with the court asking permission to pay certain foreign suppliers and vendors certain pre-petition obligations, meaning that these non-U.S. based companies may see payment sooner than later. The company said that it expects the court to approve the motion.

"Our very substantial cost disadvantage compared to our larger competitors, all of which restructured their costs and debt through Chapter 11, has become increasingly untenable given the accelerating impact of global economic uncertainty and resulting revenue instability, volatile and rising fuel prices, and intensifying competitive challenges, " said AMR Chairman, CEO and President Thomas Horton. "Our Board decided that it was necessary to take this step now to restore the Company's profitability, operating flexibility, and financial strength."

Jacob Barron, CICP, NACM staff writer

The body count of U.S.-based solar product manufacturers rose as yet another western-based firm has filed for bankruptcy. However, perhaps illustrating how tough times have gotten for the industry, this one has moved straight to the liquidation phase.

Arizona-based Stirling Energy Systems Inc. has filed for Chapter 7 in U.S. Bankruptcy Court in Delaware. At least four of such companies have now filed some form of bankruptcy since August. Like the others, Stirling is blaming the lack of demand amid the stumbling economy and under-cutting on pricing and cost for Asia-based competitors. Also in play are massive problems with saturation and over-investment during the boom years, relative to demand, which was highlighted earlier this year in NACM’s eNews and Business Credit Magazine.

Others who filed for bankruptcy protection under Chapter 11 include California-based SpectraWatt Inc.,  Massachusetts-based Evergreen Solar, and Solyndra, also based in California. Months before, BP solar operation halted its Maryland-based solar activities in favor of relocation abroad to save costs.

Solyndra has been in the spotlight, more so than the others, because of the large federal government grants it received, its ties to the Obama administration, an FBI raid on their offices on the days following their Chapter 11 filing and a present Congressional investigation into its principals’ business practices.

Brian Shappell, NACM staff writer

Some bankruptcy and business watchers thought the three-year saga that is the Washington Mutual, on of the two largest Chapter 11 bankruptcy filings, was closing in on eyeshot of the finish line. Then, a judge in the U.S. Bankruptcy Court’s Third District (Delaware) dealt it another setback by siding with lower-level creditors.

Three years since filing for Chapter 11 bankruptcy protection, WaMu’s creditors and shareholders presented final arguments in bankruptcy court asking for the judge to reject a $7 billion reorganization plan last month. Opponents argued a settlement deal WaMu made with a group of hedge funds undermines the fairness of the bankruptcy process and alleged incidents of insider trading. U.S. Bankruptcy Judge Mary Walrath evidently found the argument compelling as she rejected the reorganization plan this week in court and ordered the sides to enter mediation. In the process, she reportedly intimated it was likely some involved in WaMu proceedings, namely a quartet of hedge funds, indeed engaged in insider trading practices to shape the bankruptcy process, as some lower-level creditors alleged.

The proposed settlement, like many proposed bankruptcy plans in recent years, would have left unsecured creditors and shareholders with little or nothing, more likely the latter. Even Walrath herself has described the case as convoluted and intimated that litigation was likely to rage on in one form or another for some time.

Brian Shappell, NACM staff writer

The bipartisan nature of H.R. 2533, the Chapter 11 Bankruptcy Venue Reform Act, was on display this morning during a hearing on the bill in the House Judiciary Committee.  Lawmakers from both sides of the aisle asked a small group of witnesses an array of questions, and regarded the arguments against the bill, proved by lone dissenting witness Professor David Skeel of the University of Pennsylvania Law School, with a great deal of skepticism.

Held in the Committee’s Subcommittee on Commercial and Administrative Law, chaired by Rep. Howard Coble (R-NC), the hearing offered the bill’s sponsors and supporters to lay out their qualms with current bankruptcy venue statutes, which allow debtors a strikingly broad array of choices of where to bring their case.  “These rules allow a large Chapter 11 debtor to choose their venue…This leads to some strange results,” said Coble in his opening statement.  “The Los Angeles Dodgers, an entity with Los Angeles in its very name, filed in Delaware.”

Coble mentioned a complaint that would arise again and again in the hearing, noting that the leeway that Chapter 11 debtors have in where they file their bankruptcy case often comes at the expense of smaller creditors.  “Small creditors must defend preference claims filed in a remote jurisdiction,” he said.  “[They’re] sometimes left in the dust.”

Judiciary Committee Chairman Lamar Smith (R-TX), one of the bill’s original sponsors, noted in his opening statement that H.R. 2533 would not only correct provisions that disenfranchise smaller creditors, but also restore the Constitution’s original intent for the nation’s Bankruptcy laws.  “The current Chapter 11 venue rules allow many corporations to forum shop for a venue with favorable judicial precedent for the business.  For example, a nationwide retailer may prefer to file in Delaware because of the Third Circuit’s well-known rulings on the treatment of unpaid rent in bankruptcy.  At the same time, a business with many unionized employees can avoid filing in Delaware to avoid Third Circuit precedent on collective bargaining rights in bankruptcy,” said Smith.  “The Constitution instructs Congress to enact uniform bankruptcy laws.  While courts of appeal are permitted to interpret Bankruptcy Code provisions differently, Chapter 11 debtors should not be able to leave their home districts and shop for a forum whose judicial precedent on bankruptcy law they happen to prefer.”

Three of the four witnesses agreed with the Chairman, and supported the bill, namely Peter Califano, partner with Cooper, White & Cooper who testified on behalf of the Commercial Law League of America (CLLA), Hon. Frank Bailey, chief judge of the Bankruptcy Court for the District of Massachusetts, and Professor Melissa Jacoby, of the University of North Carolina School of Law. 

“The consequences of corporate bankruptcy are most profound in the communities where the debtors’ principal assets are located,” said Califano.  “If bankruptcies are filed in remote districts, the parties with the most familiarity with the debtor’s operations might be cut off in the process.”  Bailey and Jacoby agreed with Califano, with Bailey noting that “the current venue statute undermines confidence in the bankruptcy system,” and Jacoby observing that “the current laws really do risk being perceived as being procedurally unfair.”

Subcommittee Ranking Member Rep. Steve Cohen (D-TN) added that the current venue rules ultimately harm “small creditors, employees and other affected stakeholders,” and that “this bill [H.R. 2533], that’s bipartisan, offers what we think are common sense changes to bankruptcy venue statutes.”

NACM has publically voiced its support for H.R. 2533, and has long advocated for sensible changes to the Code’s rules governing where a debtor may file.  To urge your member of Congress to support the Chapter 11 Bankruptcy Venue Reform Act, look up your congressperson’s contact information here (be sure to rely on your company’s address rather than your own home address), then visit NACM’s Advocacy page to download a form letter that you can personalize to increase its effect on your representative.

If you have any questions, contact Jacob Barron, NACM staff writer and government affairs liaison, at jakeb@nacm.org.

Jacob Barron, CICP, NACM staff writer

(EDITOR'S NOTE: Solyndra LLC officially filed for Chapter 11 in U.S. Bankruptcy Court in Delaware early Tuesday. Story originally posted on 9/1/11)  As predicted in NACM’s eNews more than a month ago, “green” business has become far from gold, especially where solar is concerned. Just last Monday, NACM covered the SpectraWatt Inc. Chapter 11 bankruptcy filing. One day later, yet another company announced it was with certainty heading down the same path.

Solyndra LLC, a solar energy products firm which gained notoriety during well-publicized visit there by President Barack Obama in 2010, announced plans to file for bankruptcy protection as early as next week. It marks the third solar in a month to official file for or announce Chapter 11 in the last month, with more potential struggling firms in the pipeline. Like SpectraWatt shortly before them, the company’s high-tech solar product offerings had become “noncompetitive” as Asian manufacturers, especially those based in China, continue to deeply undercut the firm and its competitors on pricing and overhead. Even significant financial assistance in the form of federal programs could not help enough. The problems are fueling speculation about widespread, near unrecoverable problems emerging in the solar business niche. More than 1,000 Solyndra employees are expected to be out of work almost immediately as a result of the company’s proverbial white flag.

As previously noted, it’s a prediction Credit Management Association's Mike Joncich make in an interview for stories in NACM's eNews and. the new issue of Business Credit Magazine. He noted the industry's problems go deeper than just an economic downturn/slow recovery and include serious over-saturation:

"There was over-investment in those industries [during the boom], and a number of companies are going to fall out that didn't have the right ideas or right business models to survive,” said Joncich. “Credit managers have to be aware of such phenomena."

Earlier this month, Massachusetts-based Evergreen Solar filed for Chapter 11 bankruptcy protection and, months before that,  Maryland-based BP solar operation halted its activity in favor of relocation abroad to save costs.

Brian Shappell, NACM staff writer

Three years after the two largest Chapter 11 bankruptcy filings in U.S. history, one case appears close to the finish line, while another could very well be stalled for some time.
U.S. Bankruptcy Court for the Southern District of New York Judge James M. Peck approved the Lehman Brothers' payment plan to creditors Tuesday. Specifics of the plan will be available to the nearly 50 creditors who combined for claims exceeding $130 within weeks, with a Nov. 4 voting deadline.

A confirmation hearing is tentatively scheduled for Dec. 6. Bryan Marsal, LBHI's Chief Executive Officer called the judge’s approval of the plan a “major milestone” in the complicated bankruptcy case. Coincidentally, there was also significant news in the last week coming out of the second largest bankruptcy case in U.S. history, though it may not be all that close to completion.

Also nearly at the three year point since it filed for Chapter 11 bankruptcy protection, Washington Mutuals creditors and shareholders presented final arguments in bankruptcy court asking for the judge to reject a $7 billion reorganization plan. Opponents argued a settlement deal WaMu made with a group of hedge funds undermines the fairness of the bankruptcy process and alleged incidents of insider trading.

The proposed settlement, like many proposed bankruptcy plans in recent years, would leave unsecured creditors and shareholders with little or nothing, more likely the latter. Even U.S. Bankruptcy Judge Mary Walrath intimated the case continues to be convoluted by those involved and that a decision on her part isn’t necessarily imminent.

Brian Shappell, NACM staff writer

The realities of a tough market for sustainability based products and services, which were all the rage during the late boom years last decade, continue to dampen the once rose-colored view on green  business. Yet another blow to the so-called green products and services niche segment came last week as New York-based SpectraWatt Inc., a spin-off of Intel Corp. that had been based in Oregon until 2009, filed for Chapter 11 bankruptcy protection.

SpectraWatt officials said the company’s products, primarily high-tech solar cells, had become “noncompetitive” as Asian manufacturers continue to deeply undercut the firm and its competitors on pricing and overhead. Hurting matters for the company earlier this year was its unknowing receipt of defective components that were used in the production of its own products, which caused their value to plummet.

In the filing, SpectraWatt foreshadowed a slew of solar business failures by pushing for an auction to be held quickly, in less than one month, on its prediction that the market will be flooded with such solar product sales very soon. It's a prediction Credit Management Association's Mike Joncich make in an interview for stories in NACM's eNews ann the new issue of Business Credit Magazine. He noted the industry's problems go deeper than just a downturn/slow recovery:

"A lot of companies started up to participate in that sector—there was a substantial investment in green companies that are making the best of products that are energy- or resource-saving," said Joncich. "But there was over-investment in those industries, and a number of companies are going to fall out that didn't have the right ideas or right business models to survive. Credit managers have to be aware of such phenomena."

Also this month, Massachusetts-based Evergreen Solar filed for Chapter 11 bankruptcy protection. Despite receiving millions in federal and state grant dollars and tax incentives, the solar business has struggled mightily in the last two to three years. Earlier this year, it shut down a U.S. plant that employed more than 800 people and, like a Maryland-based BP solar operation before it, relocated abroad to save costs.

Brian Shappell, NACM staff writer

(Updated) A U.S. Bankruptcy Court judge has approved a plan for Borders to liquidate its assets following failed attempts to find a buyer.

Stung as a deal fell through at the last minute, struggling book-retailer Borders announced early this week that a potential bankruptcy auction would not go forward earlier and that the end of former giant through liquidation essentially was unavoidable.

Borders, whose Chapter 11 bankruptcy filings were made in February, had submitted to bankruptcy court a previously-announced proposal from Hilco and Gordon Brothers to purchase the store assets of the business and administer the liquidation process. Borders presently operates 399 stores, which employ more than 10,000 people. As many as three dozen stores and 1,500 Borders jobs could be saved as negotiations still are ongoing for retailer Books-A-Million to those locations over, which was predicted by Wanda Borges, Esq., of Borges & Associates LLC, in an interview with NACM earlier this week. 

"A notice has been filed that says 'the debtors received a bid from a non-insider to purchase the inventory, furniture, fixtures, equipment and leases for approximately 30 stores for which the debtors reserve the right...to seek approval in connection with the sale hearing...to be held on or about July 21, 2011...if the bid becomes a qualified bid.' This week could still prove interesting in the Borders case -- we may yet see a continued business operation," Borges told NACM.

Products such as the Kindle and other growingly popular electronic book-reader products hit significantly at Borders’ business model, and both they and top competitor Barnes & Noble have been trying to break into the more techno-friendly niche. However, both have been playing from behind, so to speak.

"The big box retailers have suffered from internet sales -- books are now becoming really an alternative to electronic media," said Credit Management Association's Mike Joncich about the shifting industry paradign. "Borders took a wrong turn while people like Amazon and Barns & Noble took a right turn to embrace the electronic delivery method." Joncich added that he believes "the age of the big box retailers may be coming to an end." 

Foreshadowing of Borders' demise into bankruptcy gained steam through late 2010 and, increasingly, throughout January. The big-box book retailer intimated twice in as many months that it would have to delay payments to creditors and/or vendors in an attempt to bolster its capital position. In additions, it was widely reported that Borders was trying desperately to renegotiate terms with financiers at Bank of America and General Electric, among others. These developments all helped tank a stock that was already trading below $0.50. A late 2010 poll conducted by The Street found that more than two-thirds of respondents believed a Borders Chapter 11 filing was likely. At least one major publishing company reportedly stopped all shipment of books to Borders for a time, fearing this week's announcement was an inevitability that would arrive sooner than later.

Brian Shappell, NACM staff writer