Insolvency Alerts August 2012

Insolvency Alerts August 2012

August 22nd

Eastgate Hotel Owners File Prepack Chapter 11 Liquidation
The Eastgate Hotel in New York have filed a prepackaged, consensual Chapter 11 plan of liquidation.  It  that will pay off all unsecured creditors, provide profit participation to the owner, and transfer ownership of the assets to the hotel’s lenders.

Medical Imaging Co. Gamma Medica Files Bankruptcy
Medical diagnostic and digital imaging company Gamma Medica-Ideas HAS filed Chapter 11 after failing to find a buyer.

Depressed Sales Lead Limousine Maker Krystal to File Bankruptcy Again
Limousine maker Krystal Infinity has filed bankruptcy for the second time in two years, as sales failed to materialize and the economic downturn took its toll.

Settlement Prompts American LubeFast to File Chapter 11
American LubeFast has filed Chapter 11 more than a year after a deadline expired for it to finish paying a $4.4 million settlement with BP Lubricants.

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In General Economic News

Defaults on Loans Drop for Seventh Straight Month
A leading index of defaults on mortgages, credit cards, and auto loans dropped in July for the seventh straight month, according to the S&P Dow Jones Indices and credit reporting company Experian. Only second mortgages saw a slight increase from June. “Looking at the rate of new defaults in mortgages or auto loans, the consumers’ credit position has recovered from the financial crisis,” said David M. Blitzer, chair of the Index Committee for S&P Dow Jones Indices. “However, other data show that previously defaulted mortgages remain an issue and many consumers still face an overhang from old debts,” he said.

Credit Card Defaults Improve
Credit card defaults showed a big improvement in July, dropping to their lowest level since August 2007.  Fitch Ratings expects robust loan demand and good liquidity in the capital markets to fuel further auto loan growth in the near term.

Small Business Bankruptcies Decline
Small business bankruptcies continued to decline in the second quarter of 2012, shrinking by nearly 17% from the previous quarter, according to Equifax’s Small Business Bankruptcy Report. This is the fourth quarterly decline and the lowest level of filings for the second quarter since 2007.  Business bankruptcies peaked in the second quarter of 2009.

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And Now for Something Completely Different:

Some Random Insolvency Thoughts

In one corner, Greece and the ECB square off in a major game of “chicken”.  In the other, the ECB and Spain warily circle each other.  One wonders when the Europeans will stock the sparring and settle their differences.  The markets are clearly waiting for real leadership.

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August 21st

ATP Oil & Gas Files Chapter 11
ATP Oil & Gas has filed Chapter 11 in Texas Bankruptcy Court. The company is in international offshore oil and gas development and production.  ATP announced it took this action to accomplish a comprehensive financial restructuring. The company expects its oil and gas operations to continue in the ordinary course throughout the reorganization process.  It sees reorganization as a step towards deleveraging its debt position.

FirstBank Financial Services Files Chapter 7
FirstBank Financial Services has filed Chapter 7 in Georgia.  It is the holding company for FirstBank Financial Services, which was closed by the Georgia Department of Banking and Finance in February 2009.

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In General Economic News

TransUnion Corp. reports that the delinquency rate for U.S. auto loans has again hit the lowest quarterly level since the firm began tracking it in 1999. Rates in the second quarter dropped to 0.33%, down from 0.36% in the first quarter and 0.44% in the year-ago period. A recent study shows that consumers now value their auto loans more than their credit cards and mortgages. In addition to increased demand in new and used autos, bank auto debt per borrower rose to $13,427 in the second quarter from $12,689 in the year-ago period. TransUnion said that despite growing bank auto debt, the majority of states and cities are experiencing declines in their auto loan delinquency rates.

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August 2nd

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

San Bernardino Files Bankruptcy
San Bernardino, California filed for municipal bankruptcy after disclosing a $46 million shortfall in their budget, Bloomberg News reported. The city listed assets and debt each more than $1 billion in a court filing yesterday. This is the third California city filing bankruptcy since June. City officials sped up the filing due to concerns some creditors might take legal action, the city’s mayor said. The city of 209,000 is 60 miles east of LA.  Over the recent four years, it has reduced its workforce by 20% and negotiated labor cuts valued at about $10 million annually, according to a June 26 budget analysis.

Edison International Says Unit May File Bankruptcy
California power company Edison International said one of its unregulated generation subsidiaries might file chapter 11 because it may not have enough liquidity to repay debt due in 2013.

Jose Canseco Files Bankruptcy
Former Oakland Athletics slugger Jose Canseco filed for bankruptcy protection, the Associated Press reported today. He was the 1986 American League rookie of the year and the 1988 league MVP.  He is seeking liquidation in chapter 7.  His filing lists less than $21,000 in assets and almost $1.7 million in liabilities, including more than $500,000 owed to the Internal Revenue Service.

Diamond Jacks Casinos Files Chapter 11
The owner of the Diamond Jacks Casinos in Louisiana and Mississippi filed chapter 11 Tuesday, its second such filing since 2008, Dow Jones DBR Small Cap reported today. As a result of its prior chapter 11 plan, which became effective in September 2009, owner Legends Gaming LLC ‘s first- and second-lien loans were restructured, lowering the principal balance and capping the aggregate interest payments at $22 million, according to court documents. Despite this, Legends said that it had to enter bankruptcy again because its revenues have not been high enough to service the restructured loans.

Daffy’s Files Bankruptcy
Daffy’s, a New York area retail chain specializing in discounted designer labels, filed bankruptcy, Reuters reported yesterday. This follows its announcement last month that it would liquidate its 19 stores. According to its chapter 11 filing, Daffy’s 30 largest unsecured creditors are owed amounts ranging from $54,000 to $613,000.

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 In General Economic News

Balances on Non-Mortgage Consumer Accounts Reach 28-Month High
Outstanding balances on non-mortgage consumer accounts reached a 28-month high, according to Equifax’s latest monthly report. The total of $2.43 trillion in June 2012 is an increase of more than $70 billion from the same time a year ago. Accompanying the increase is a rise in new credit — the most recent data reflecting increases in new account total credit limits of 14% from April 2011 ($218 billion) to April 2012 ($248 billion). This increase has been led in large part by a strong auto lending market. The June 2012 total of auto balances is $745 billion, an increase of more than $46 billion from same time a year ago ($699 billion). According to the latest data, auto-lending year-to-date in April 2012 totaled $134.3 billion, the second-highest amount in seven years (2006, $137.3 billion).

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August 1st

Recently Reported Insolvency News from the American Bankruptcy Institute and other sources

Curaxis Pharmaceuticals Files Chapter 7
Curaxis Pharmaceuticals has filed a Chapter 7 bankruptcy in California.  The company is a specialty pharmaceutical company with a hormone drug candidate for Alzheimer’s and cancer.  A Chapter 7 trustee was appointed, and the company’s assets will be liquidated.

MF Global Holdings Trustee to Pay Claims
The bankruptcy trustee for MF Global Holdings Ltd. expressed confidence the firm’s U.S. customers will get all their money back, the Wall Street Journal reported. In written testimony submitted to the Senate Agriculture Committee for a hearing today, trustee Louis J. Freeh said that investors are still owed an estimated $1.6 billion but “eventually will be made whole.”

Philadelphia Orchestra Officially Emerges from Chapter 11 
A month after Bankruptcy Judge Eric L. Frank approved its reorganization plan, the Philadelphia Orchestra Association announced that it has officially emerged from chapter 11 protection.

Dewey Secures Two Extra Weeks of Bankruptcy Funding 
Bankrupt law firm Dewey & LeBoeuf yesterday secured an extra two weeks of financing, giving it leeway in trying to convince former partners to accept a settlement and avoid what could be years of litigation.

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In General Economic News

ADP Jobs Report Tops Expectations
Payroll processing firm ADP has reported today that the economy added 163,000 non-farm private-sector jobs in July — well above analysts’ expectations of around 120,000 jobs.

U.S. CONSUMER SPENDING FALLS IN JUNE; INCOMES RISE
Consumer spending in the U.S. fell in June and marked the second straight decline, although though wages rose sharply, MarketWatch.com has reported. Spending fell less than 0.1 percent last month on a seasonally adjusted basis, and spending for May was revised down slightly to a 0.1 percent decrease. Personal income, however, jumped 0.5 percent in June. Since incomes rose faster than spending, the personal savings rate rose to 4.4 percent from 4.0 percent.

REPORT: COMPLETED U.S. FORECLOSURES HOLD STEADY IN JUNE
CoreLogic has reported that the rate of completed U.S. home foreclosures held steady in June, compared to May, and that the level was down from a year ago, according to Reuters. There were 60,000 finished foreclosures in June, the same as in May and down from the 80,000 seen in June 2011, CoreLogic said. Since the financial crisis in September 2008, there have been about 3.7 million foreclosures. About 1.4 million homes, or 3.4 percent of homes with a mortgage, were in some stage of foreclosure — down from 1.5 million homes, or 3.5 percent, a year ago and unchanged from May. The five states with the highest number of foreclosures in the last 12 months were California, Florida, Michigan, Texas and Georgia, which alone accounted for 48.4 percent of all completed foreclosures.

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Joel Glucksman is an experienced civil and bankruptcy litigator specializing in the representation of secured lenders and other creditors in complex suits and bankruptcies. His court appearances take him throughout the State and Federal courts in the metropolitan area, focusing in particular on the Bankruptcy Courts for the District of New Jersey and the Southern and Eastern Districts of New York. For more information, please visit Joel Glucksman’s full biography at Scarinci Hollenbeck

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