Judge Griesa has approved Citibank's request to transfer funds it received in payment of both dollar- and peso-denominated, Argentine-law bonds. Order attached. The difficulty, as described in this recent letter from Citibank, is that some of the country's Argentine-law bonds are subject to the injunction, and some are not. The latter group includes bonds issued as part of the country's settlement with Repsol. But it isn't possible to distinguish the payments, because all the bonds have the same ISIN number. Oops. What to do? Judge Griesa "does not wish to upset the settlement with Repsol," so he has allowed Citibank to make payment on all of the Argentine-law bonds, including exchange bonds subject to the injunction. But just this once. The parties are supposed to work together to "devise a way to distinguish between the Repsol bonds and the exchange bonds before the next interest payment is due." I'm not sure how that will work, but I suppose there are bigger fish to fry at the moment. Tick tock. Tick tock.

Credit Slips
(posted 4 hours 59 sec ago)

Debtors in Chapter 13 generally keep all of their property, whether or not it is exempt, but they make regular payments on their debts out of the money that they earn after filing the bankruptcy case.
These payments must be at least as much as would have been paid to creditors in a Chapter 7 case. The payments are made to a trustee, who distributes the payments to the creditors.
The payments are made in regular installments, according to a plan that the debtor draws up, with the help of an attorney.
The plans last either until the debts are paid in full or until the end of a three to five year period.
The debtor receives a discharge at the end of the plan.
Before filing Chapter 13, debtors are required to complete a credit counseling session with an approved counseling agency.
photo credit: dno1967b via photopin cc

(posted 5 hours 30 min ago)

On Monday, July 28, 2014, Massachusetts based Ambient Corporation filed for chapter 11 protection in Delaware.  Attached here is a copy of the petition that includes a list of the top 20 unsecured creditors.  According to the petition, Ambient has between 50 and 99 creditors. Ambient’s estimated assets are listed between $1 million and $10 million with liabilities estimated between $1 million and $10 million.
The debtor offered the Declaration of J. Joyce in Support of its First Day Motions and provided an organizational chart in the Exhibit A attached to the declaration. As set forth in the Joyce Declaration, Ambient has entered into a stalking horse purchase agreement with a potential purchaser, Ericsson, Inc. and intends to seek approval of bid protections and bidding procedures to complete the marketing process of the sale of its assets.
The case has been assigned to The Honorable Kevin Gross for administration (lead case no. 14-11791-KG).

(posted 6 hours 29 min ago)

Creditors contemplating the bold step of commencing an involuntary bankruptcy case against a putative debtor may wish to consider a recent decision of the Bankruptcy Court for the District of Minnesota Court, In re American Resource & Energy, LLC, where the court dismissed an involuntary chapter 7 petition by summary judgment motion after determining that (a) each of the three petitioning creditors failed to qualify under section 303(b)(1) of the Bankruptcy Code to file a bankruptcy petition as a “bona fide dispute” existed with respect to each of their putative claims when they filed the petition that commenced the case and (b) with the disqualification of those parties as petitioners, the joinder of a fourth creditor to the petition post-filing did not satisfy the debt threshold of section 303(b)(2) to allow that party to maintain the petition even if the putative debtor had fewer than twelve creditors in all. For want of a qualified petitioning creditor holding claims in a sufficient amount against the putative debtor, the petition, and the case as a whole, was dismissed.

(posted 8 hours 16 min ago)

As Argentina finds itself on the verge of a second default, what blame, if any, does the distressed investing community hold?

In February 2012, certain distressed investor bondholders who held out and did not agree to a debt restructuring and exchange with Argentina won a decision in the U.S. District Court for the Southern District of New York requiring Argentina to pay the holdouts the full amount due under the bonds. The court eventually issued an order enjoining Argentina and all banks who disburse funds on behalf of Argentina from paying those bondholders who consensually agreed to a debt restructuring unless the holdouts were paid the amounts originally due under the bond indenture. Appeals of those decisions were not successful. And now, Argentina finds itself on the possible brink of a default to all bondholders.

WSJ.com: Bankruptcy Beat
(posted 9 hours 28 min ago)

Studies of whether big banks enjoy implicit funding subsidies should take into account the effect of post-Dodd-Frank legislation and regulation, write Aaron Klein and Peter Ryan of the Bipartisan Policy Center.

(posted 9 hours 33 min ago)

At its annual meeting, the National Conference of Commissioners on Uniform State Laws (NCCUSL) formally adopted the Uniform Voidable Transactions Act (UVTA). Under its provisions, I believe it says any service member in uniform will be able to avoid a transaction . . . . Hold on, let me give it a read.
Having now bothered to read it, I see it is actually an amendment to the Uniform Fraudulent Transfer Act (UFTA). If you are not familiar with the idea, let's say that you live in Tudor England and are some person named Pierce with a flock of sheep. You also happen to be insolvent. You give the sheep to your buddy, Twyne, because you much prefer you old pal to have the sheep than your creditors. Your creditors cry "baaa" because they could sell the sheep and get repaid. On these facts, Star Chamber will make Twyne give the sheep or their monetary equivalent to your creditors.  And, yes, we are talking about that "Star Chamber."

Credit Slips
(posted 9 hours 43 min ago)

As Argentina finds itself on the verge of a second default, what blame, if any, does the distressed investing community hold?

As Argentina edges closer to a second default on its sovereign debt in little more than a decade, commentators have been warning of a potential recurrence of the devastation wrought by the Great Argentine Depression of 1998-2002. Many have been quick to lay the blame for Argentina’s current financial dilemma on “vulture fund” investors who refused to take part in Argentina’s 2005 and 2010 debt restructurings and are owed roughly $1.5 billion. However, as with every controversy, there is more than one side to the story.

WSJ.com: Bankruptcy Beat
(posted 10 hours 58 sec ago)

As Argentina finds itself on the verge of a second default, what blame, if any, does the distressed investing community hold?

The real issue at play here isn’t who’s “right” or who’s “wrong,” but whether the appropriate legal and restructuring mechanisms are in place to achieve equitable solutions for all parties in the future without anyone having to go through this type of brinksmanship.
To put it another way:  Is it time to consider expanding the U.S. Bankruptcy Code to more directly address sovereign debt as it already addresses corporate, state and municipal debt?
I cannot claim to know exactly how the Code might be expanded; however, the Argentina case does shine a light on a number of areas where the time-tested learnings from corporate restructurings might well be applied to sovereign restructurings in the future, leading to easier, effective and equitable outcomes. Two critical areas that come to mind are:

WSJ.com: Bankruptcy Beat
(posted 10 hours 26 min ago)

As Argentina finds itself on the verge of a second default, what blame, if any, does the distressed investing community hold?

With the crisis surrounding Argentina’s debt continuing to play out in both the U.S. courts and in Buenos Aires, questions are being asked about who is responsible for the potential economic collapse of this significant and fragile economy. In large measure, the answer depends upon how the protagonists in this decade-long struggle are perceived.
Are the hedge funds spearheaded by Paul Singer and NML Capital Ltd., who purchased Argentinian bonds at rock bottom prices solely to reap massive profits, “vultures?” Are they willing to thwart Argentina’s restructuring to further that aim? Or, are these hedge funds properly exercising their legal rights to maximize the return to their investors? On the other hand, is Argentina merely taking all available efforts to restructure its debt? Or is the country, as the Second Circuit noted, “a uniquely recalcitrant debtor?” Realistically, the answer falls somewhere in the middle.

WSJ.com: Bankruptcy Beat
(posted 10 hours 58 min ago)