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Bankruptcy

Credit Slips

A discussion on credit and bankruptcy.
By Bob Lawless, Adam Levitin, Angie Littwin, Katie Porter, John Pottow, Debb Thorne, Elizabeth Warren

Post Frequency: 12.8/day

Last Entry: April 01, 2011 at 09:01:41

GM's Bondholders

Posted on May 27, 2009
Felix Salmon has an important new post on the practical differences between the Unions and GM's bondholders, even if they are both formally unsecured creditors. It's also important to remember that the GM bondholders are unsecured, unlike the dissenting creditors...

The Cost of Going Broke

Posted on May 26, 2009
The NY Times is out today with a kind of obvious, yet important article making the point that the big beneficiaries from the seemingly inevitable GM bankruptcy will be the bankruptcy lawyers and other bankruptcy professionals. As the Times notes,...

§363(f) and Successor Liability

Posted on May 25, 2009
Another interesting objection to the Chrysler sale motion comes from the State of Connecticut. The State argues Neither the Supremacy Clause of the United States Constitution nor the doctrine of preemption obligate state courts to enforce an otherwise valid order...

363(f) and Dealership Agreements

Posted on May 24, 2009
With the Chrysler sale hearing slated to begin Wednesday morning, the attorneys at Jones Day are no doubt spending their Memorial Day weekend writing an omnibus response to the many objections already on the docket, as well as negotiating resolutions...

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What do they think will happen now?

Posted on May 22, 2009
GM bondholders are rejecting the exchange offer that would give them 10% of the company. I've always said that getting 90% of the bonds, given the widely dispersed ownership, was an extreme longshot. But I hope the bondholders understand that...

Thorne's Post to the NYT's blog, "Room for Debate"

Posted on May 21, 2009
A couple days ago, I was asked to write up a comment/response to the following statement for the NYT?s blog, ?Room for Debate: A Running Commentary on the News?: ?As Congress and federal regulators move to limit how much banks...

Sub Rosa Plans

Posted on May 21, 2009
Lots of discussion of sub rosa plans lately, but little discussion of the fact that the 2d Circuit has never really embraced the Braniff-type analysis of this issue. For example, the sale objection filed by the "Committee of Chrysler Affected...

Repealing Marquette

Posted on May 20, 2009
Senator Sheldon Whitehouse has introduced, with Senator Dick Durbin, the Empowering States' Right to Protect Consumers Act of 2009 (S. 255). The statute would repeal the thirty-one year old Marquette decision, which was the United States Supreme Court ruling that...

Once More, with Feeling

Posted on May 20, 2009
I've said before that I don't see how the absolute priority argument in Chrysler has legs, unless the senior creditors can show that Chrysler's assets are currently worth more than $2 billion. There is no indication that the consideration going...

A Williams Act for Derivatives

Posted on May 20, 2009
One reason I?ve often thought that the benefits of moving credit derivatives to a central clearing house/exchange model have been oversold turns on the ability to move trades offshore. This is highlighted in an excellent article in today?s FT, in...

Collateral, Collateral Everywhere

Posted on May 19, 2009
IDSA has been trumpeting the increased use of collateral in derivative transactions, which is said to reduce the systemic risk associated with derivatives. An article in today?s Financial Times notes that non-financial users of derivatives are concerned that the Administration?s...

Credit Card Legislation

Posted on May 19, 2009
The most significant credit card reform legislation since the 1968 Truth-in-Lending Act cleared its last major hurdle today, when it was overwhelmingly approved by the Senate. There are some not inconsequential details to iron out in conference (House version, Senate...

Do Bidding Procedures Matter?

Posted on May 18, 2009
I?m just back from the American Law and Economics Association annual meeting, and the big topic of discussion was Chrysler?s recently approved bidding procedures. In particular, virtually everyone I spoke with was dismayed by the requirement that a bidder assume...

AP Launches the Economic Stress Index

Posted on May 18, 2009
The Associated Press has launched the Economic Stress Index. Credit Slips readers will find it very useful and interesting. For a dataphile like myself, it's just plain cool. OK, it's not cool at all because it shows the tremendous depth...

Home Depot Spends More on Interchange than on Health Care

Posted on May 17, 2009
I was bowled over by a figure in The Home Depot's presentation at the Chicago Fed?s 2009 Payment Systems Conference this week: The Home Depot paid more in interchange than for employee health care last year. That?s astounding. Interchange is...

Gamble Away the Risk

Posted on May 14, 2009
Bankruptcy is a back-stop for risk management errors. Last week I attended a conference sponsored by the Center for Health, Economic, and Family Security at Berkeley Law on the appropriate level of risk that government, private industry, and individuals should...

The Footwear Begins to Fall

Posted on May 14, 2009
Chrysler has filed its motion (Docket No. 780) to reject about a quarter of its dealership agreements. And while I don?t want to become as grumpy as this guy, it would be nice if the press could accurately relay the...

Credit Default Swaps & Regulation

Posted on May 14, 2009
The administration has proposed new regulations that would move a substantial part of the extant CDS market onto exchanges and force clearing through central clearing agents. This is fine, as far as it goes. The clearing agents will provide regulators...

Chrysler & 363 Sales, Again

Posted on May 14, 2009
Two leading bankruptcy professors are out with new critiques of the pending Chrysler sale motion. Todd Zywicki argues that the President has violated the rule of law by promoting a plan that violates the absolute priority rule, because the union...

Haven't we been over this already?

Posted on May 13, 2009
Bloomberg is out with a breathless new story about how the "30 to 60 days" that the President referred to with regard to Chrysler is not actually the length of the bankruptcy case but the time until "new Chrysler" emerges...

Setting up the Bondholders

Posted on May 12, 2009
GM?s CEO said today that the company would not alter the terms of its exchange offer, and that the company?s fate rested with the bondholders. But GM can?t be that naïve ? exchange offers rarely work, especially with a high...

Marginal Credit Card Borrowers Come Back to Haunt Banks

Posted on May 12, 2009
The New York Times just ran a fascinating, short piece on the relationship between unemployment and credit card defaults. Historically, there has been a strong correlation between the two, and there still is. But this time around the measures are...

A Note on GM and CDS

Posted on May 12, 2009
It is CDS day on the blog. Both the comments to my prior post and a recent post by Felix Salmon raise the issue of why GM's attempts at an out of court restructuring don't constitute a "restructuring" credit event...

Let's Make It Perfectly Clear About GM

Posted on May 12, 2009
In a post yesterday, Lubben referred to the role credit default swaps are playing in the GM, but let's make sure no one missed the point. So far, everyone seems to have missed a major point, and I think it...

Looking Ahead: GM

Posted on May 11, 2009
It seems increasingly likely that GM will follow Chrysler into bankruptcy: GM recently announced that it would pay its trade creditors five days earlier than usual, which looks like an attempt to settle up with trade creditors before the filing....

Bankruptcy Remote ? Bankruptcy Proof?

Posted on May 09, 2009
"Bankruptcy remoteness" is the bedrock of asset securitization. Bankruptcy remoteness means both that the assets will not be part of the originator's bankruptcy estate and that the securitization vehicle (SPV) will not itself file for bankruptcy. The former is achieved...

Anyone else notice this?

Posted on May 08, 2009
Chrysler's disenting senior creditors filed their much discussed 2019 statement the other day. A copy can be found here. Under Federal Rule of Bankruptcy Procedure 2019(a), the statement must include "a copy of the instrument, if any, whereby the ....

Nevermind

Posted on May 08, 2009
The Chyrsler dissenting lenders have disbanded. This does not, of course, resolve the issues I raised here.

Chrysler & Credit Bidding

Posted on May 07, 2009
As I made clear in my prior post, I think that many of the arguments advanced against the Chrysler sale motion are largely noise, generated by confusion over the structure of the deal. But I also mentioned that one real...

The Chrysler Sale Motion

Posted on May 06, 2009
I wanted to start with something about the Chrysler sale because commentators whom I respect (see here and here) seem to be somewhat skeptical of the endeavor. I think these commentators have misunderstood the structure of the sale, no doubt...

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