bankruptcy

  • 21 Feb 2012 at 2:38 PM

This Is Really Only The “Second” Greek Bailout?

By Matt Levine

If you’re into Greece you’ve probably already read all about it and if you’re not I can’t make you. But in brief: Greece is fixed and we will NEVER HEAR ABOUT ANY PROBLEMS EVER AGAIN. In less brief:
(1) Some folks stayed up all night and produced a statement.
(2) Greece’s private creditors will be offered the long-anticipated opportunity to voluntarily exchange their old bonds for new bonds, which will for the most part be the same as the old bonds except for minor differences including but not limited to a greatly extended maturity (to 2042), a 53.5% reduced face amount, and a 3.6% blended interest rate.
(3) If they don’t voluntarily exchange, which they will because – hilariously – they’ve already taken accounting writedowns (and also because I guess it’s better than a disorderly default), private holders will get CAC’ed, which may or may not be as bad as it sounds, but in any case at least CDS will pay out, unless it doesn’t.
(4) Also the public sector will do various helpful, confusing things.
(5) In exchange for this, Greece will enact horrible austerity, and because no one believes that Greece will actually do that, there will be escrow accounts and what Reuters ominously calls “permanent surveillance by an increased European presence on the ground.”
(6) Everyone is pretty sure we’ll be doing this again in six months and, look, just fair warning, I will not be writing about it then, because feh.

We haven’t had a serious international bankruptcy, which this pretty much is, since I started paying attention to the financial markets, two months ago, so I mostly think about insolvency from a US bankruptcy law perspective. One thing that happens in bankruptcy is that, like, really really roughly speaking, the creditors stop being creditors and become the owners. This isn’t always the case but the basic playbook of US bankruptcy law is: Continue reading »

If Only Twinkies Maker Had Had Someone Whose Job It Was To Remember Not To Go Bankrupt

By Matt Levine

Stephen Lubben at DealBook noticed something kind of amazing in the Hostess Brands bankruptcy case:

Turns out that Hostess has no treasury department. Indeed, it apparently doesn’t have anyone who can perform treasury functions at all.

The company has asked the bankruptcy court for permission to hire FTI Consulting to do the work. Apparently Hostess does not have much of a finance department either, since FTI is also providing employees for that department.

If approved, FTI will provide three people to staff Hostess’ treasury department. The interim treasurer gets monthly fees that work out to an annual salary of $780,000. His two deputies get $660,000 per year, each.

The finance department group gets paid hourly rates that top out at $895 per hour. You might think that would supplant the need for a financial adviser in the case, but Hostess is asking to retain one of those, too.

Now that maybe goes a little overboard on the grave-dancing (lots of, really all, companies with full honest-to-goodness treasury and finance staffs still hire advisers in bankruptcy) but, still: that is kind of weird! If you read Hostess’s motion and the attached engagement letter, it appears that they’re just seeking signoff on an arrangement they struck in June. So they’ve been operating for at least six months or so with an outside consultant as their contract treasurer – and with the rest of their treasury roles filled either by other consultants or by nobody. That’s somewhat unusual for a company with 19,000 employees, a pension plan, and something like $1bn in enterprise value.*

I don’t really know what’s going on here but just for fun let’s blame private equity! In this connection, it’s worth noting that Hostess has been down this road before and was acquired out of bankruptcy in 2009 by Ripplewood Holdings. Private equity firms are, of course, rapacious scum put on earth solely to destroy the jobs of innocent hard-working Americans, so sayeth Newt, and if you like you can put that interpretation on Ripplewood here, or not, whatever. That will be determined by a series of campaign ads and op-eds, though it’s worth noting that Ripplewood had the decency to pluck Hostess out of Chapter 11 and keep it alive for over two years before re-bankrupting it.

But I think this oddity illustrates another aspect of private equity firms, which is that their deals-’n'-finance operations tend to be comically lean and intensively supported by outside advisers. Continue reading »

  • 10 Nov 2011 at 6:45 PM

No One Tell Matt Taibbi That The Koch Brothers Maybe Did A Shady Thing In Connection With A Firm Run By A Former Goldman Guy

By Matt Levine

One way to prevent runs on the bank is to make banks stable and reassure clients that their money is safe. Maybe another way is to make a run on the bank pointless by forcing the fastest runners to give their money back to the slowpokes. That seems to be this:

Frederick Grede, trustee for the bankruptcy of futures commission merchant (FCM) Sentinel, has sued 50 of its former customers to recoup some $600 million in funds that were withdrawn prior to its bankruptcy.

He has already settled out of court with some customers and recovered about $25 million. The rest remains in litigation, filed before the two-year statute of limitations ran out.

His view is that the loss of funds should be shared equally, on a pro-rata basis, among all customers, not only those who were left holding the bag when Sentinel filed for bankruptcy. …

But the Sentinel case still could set a precedent for MF Global if attorneys for former clients can show that MF Global used customer funds to trade its own book.

And if, y’know, Grede wins. I am not a bankruptcy lawyer but it seems like quite a stretch under the relevant bankruptcy section to claw back ordinary-course withdrawals of client money from their own segregated accounts. So I’m not too worried for the guys who got their money out, who of course include Koch Industries, which makes total sense because Koch is both a big commodities trader and a Zelig of conspiracy theories. This guy’s not worried either:
Continue reading »

  • 22 Aug 2011 at 4:25 PM

Man With Bong Will Bring Bankrupt California Town Back From The Brink

By Bess Levin

When Ruth Rooney bought a home in Vallejo, California in 2005, Bloomberg reports, “there were few vacancies and the historic Hill neighborhood attracted young professionals.” Then the city lost the US Navy’s Mare Island shipyard, it’s largest employer and filed for bankruptcy and now? Rooney’s property value has “dropped 70 percent in six years” and Vallejo attracts a different type of “professional” to the area. One that can do a “job” out of your car or anywhere it’s convenient to drop trou.  Continue reading »

  • 08 Aug 2011 at 12:15 PM

Jim Rogers: Just Give Up Already

By Bess Levin

“It seems to me it’s physically, humanly impossible for the U.S. to ever pay off its debt ,” Rogers said. “They can roll it over and continue to play the charade, but the U.S. is bankrupt.” [CNBC]

  • 13 Jun 2011 at 3:18 PM

Lenny Dykstra Pleads Not Guilty To Bankruptcy Fraud

By Bess Levin

Former New York Mets and Philadelphia Phillies outfielder Lenny Dykstra pleaded not guilty Monday in a federal case where he’s accused of embezzling money from a bankruptcy estate. An out-of-sorts Dykstra appeared in a Los Angeles federal courtroom where he entered his plea while flanked by a new attorney, a deputy federal public defender. His previous lawyer, Mark Werksman, wouldn’t comment about why he no longer represented Dykstra, but noted a judge has declared the one-time baseball star indigent. Federal prosecutors contend Dykstra, 48, sold or destroyed more than $400,000 worth of items from an $18.5 million mansion without permission of a bankruptcy trustee. When U.S. Magistrate Judge John McDermott asked Dykstra if he understood the charges, the ex-big leaguer gave an incoherent response. “I don’t understand it, but I understand them,” said Dykstra, who appeared dazed. [AP]

  • 01 Jun 2011 at 4:56 PM

Sbarro’s Denies Lack Of Philly Cheese Steak Stuffed Pizza Harbinger Of Bankruptcy-Related Cost-Cutting To Come

By Bess Levin

… if you tried to get a Philly cheese steak slice at the Sbarro on Seventh Avenue on Wednesday, you’d see it wasn’t even listed on the menu alongside the restaurant’s other stuffed pizzas and strombolis. Sbarro’s online menu still shows it, and Bankruptcy Beat called another New York Sbarro and was assured by a manager that it’s still on the menu, though not Wednesday “because we got no beef.” [WSJ]