Archive for the ‘Commercial or Business Bankruptcy’ Category

By Joseph N. DiStefano

What happens when a town runs out of money?

In cities and townships around Pennsylvania, income, sales and property tax collections have fallen as the recession drags on.

But municipal expenses haven’t gone away. Roads need work. Crime and fires still need fighting. Health and pension costs keep rising.

So local governments, the biggest employers in many communities, cut services and jobs. “It becomes a really tough downward spiral,” said public-finance partner William Rhodes at law firm Ballard Spahrin Philadelphia.

A few towns see another way to ease costs. Westfall Township, in Pennsylvania’s northeast tip, cut millions from its debts last month as the first town in state history to successfully reorganize under Chapter 9 of the federal bankruptcy code.

In Harrisburg, City Controller Dan Miller calls bankruptcy “an option” to cut the state capital’s towering debt after the local authority failed to make payments on its bungled incinerator, deputy controller Bill Leinberger told me.

Chapter 9 leaves local officials in control of towns as they negotiate with creditors to delay or cut public debts. That’s in contrast with Chapter 11 bankruptcy, which gives creditors influence, and often control, over private companies that can’t pay what they owe.

Until now, it’s been a last resort. Westfall faced an unusual, crushing expense from a legal settlement. Harrisburg  Mayor Linda D. Thompson and other officials are reviewing the sale of city property, and service and wage cuts recommended by state advisers, to avoid bankruptcy. Philadelphia hasn’t considered Chapter 9, says finance chief Rob Dubow.

Spending in Chester, Pittsburgh, Reading, Scranton and other financially troubled Pennsylvania cities is monitored by state advisers under Act 47, which gives distressed towns state financial support and flexibility from state rules in exchange for spending curbs. Philadelphia has a separate, similar fiscal-oversight board.

Fred Reddig, who heads the local-government office in the state Department of Community and Economic Development, calls Act 47 “a safety net to deal with a municipality that has fallen over the cliff. Hitting the bottom, that would be a Chapter 9 filing.”

A town’s bankruptcy “would affect the interest rates [nearby] municipalities have to pay” to borrow money between tax collections and for capital projects, said James Roberts, a partner at Eckert Seamans Cherin & Mellott L.L.C. in Pittsburgh, who’s been hired by the state to work with that city and has advised other distressed towns.

Reddig says towns including Chester and Wilkinsburg have used Act 47 powers to force cuts in public-worker wages and employee health spending.

So far, they haven’t used it to try to cut future municipal pensions, which towns have systematically underfunded across the state, making them potentially the biggest drain on public resources.

There’s no legal reason towns couldn’t use the act’s provisions, or even bankruptcy, to push for lower-cost pension programs for future retirees, Reddig told me.

Land, money, tax

Westfall’s problems were “unique,” says J. Gregg Miller of Pepper Hamilton L.L.P. in Philadelphia, who represented the township in its bankruptcy: The township owed developers $20 million, more than 10 times its yearly budget, from a court award in a long-running land-use dispute. When the developers tried to collect, Westfall filed for bankruptcy, with the state’s support.

The Chapter 9 plan shaved more than half off what Westfall owed and gave the township 20 years to pay, in installments. Even so, Westfall had to raise its real estate tax rate 25 percent.

Even when states don’t oppose a town’s declaring bankruptcy, Chapter 9 is expensive and time-consuming, because creditors typically fight it in court, forcing towns to spend extra on proving they’re broke, said Miller.

Still, “Westfall’s important” because it shows it can be done, said Rhodes, at Ballard Spahr.

“The reality is that state and local governments and their fiscal health will be the last thing to recover in this Great Recession,” he told me. “It’s hit them in so many ways,” from pension-investment losses to lower tax hauls.

If the economy stays slow for another three to five years, as bank analysts expect, municipal governments could be looking at a “lost decade” of relentless cuts, Rhodes said.

For the desperate, that could make Chapter 9 bankruptcy a less ugly choice.

Washington Post Staff Writer
Sunday, April 11, 2010

The steady stream of emergency room patients at St. Vincent’s Hospital Manhattan stopped Friday as the bankrupt institution prepared to close its doors for good.

“It’s a weird feeling. It’s so quiet. We knew this day was coming, but it’s still a shock to see an empty emergency room in the heart of New York City,” said Dr. Alex Chang, a surgeon at St. Vincent’s for four years.

Ambulances stopped taking patients to the West Village hospital at 10 a.m. Friday. Within an hour, the usually jammed emergency room was a ghost town.

“It feels like a death in a family,” Chang said. “It’s awful. Everyone is real upset.”

“A lot of the paramedics had tears in their eyes,” said Dominique Sicile, 49, a veteran nurse who spent 24 years at St. Vincent’s. “It’s a horrible day. Today is the end of an era.”

The board of St. Vincent’s voted this week to close inpatient services at the 160-year-old hospital because of a crippling $700 million debt.

Advocates had hoped for a last-minute deal with an outside company to keep the hospital open, but it never came.

The state is seeking proposals from private health care companies to take over urgent care at St. Vincent’s in the hope that at least the emergency room can be saved.

Insiders say two potential deals to keep the hospital open fell through because the companies – Mount Sinai Medical Center and Continuum Health Partners – couldn’t make it work financially when policymakers demanded they preserve inpatient services.

“The politicians weren’t exactly being helpful,” one insider said.

“Now they’re yelling about the hospital closing, but they weren’t willing to do what was necessary to keep it open months ago,” he said. “There’s a lot of disingenuousness going on.”

Continuum and Mount Sinai are back in contention to take over the emergency room, sources said. Sources say they soon will have the added benefit of bankruptcy protection, which protects them from St. Vincent’s debt.

Meanwhile, nearby hospitals had heavier-than-usual loads in emergency departments Friday. Last week, Bellevue Hospital saw a 13% jump in visits in recent weeks in anticipation of St. Vincent’s closure.

Now, they’re seeing double the number of patients in the emergency room.

“We’re worried,” said Dr. Christopher McStay, assistant director for emergency services, who said Bellevue expects 20,000 additional ambulance visits every year with St. Vincent’s closed.

“Losing St. Vincent’s leaves a gaping hole in the community,” he said. “St. Vincent’s was a safety net hospital, and now that that’s gone, what’s left?”

With Jill Colvin

sgoldsmith@nydailynews.com

http://prlog.org/10620470

http://www.twitter.com/ncbankruptcylaw

UPDATE 1-Post-bankruptcy GM posts $4.3 bln 2009 loss

* GM loss from July 10 to end-2009 totals $4.3 bln

Stocks  |  Bonds  |  IPOs

* GM says believes profit possible in 2010

* Fresh start accounting paves way for IPO

DETROIT, April 7 (Reuters) – General Motors Co [GM.UL] posted on Wednesday a $4.3 billion net loss from the time of its emergence from bankruptcy in July through the end of the year and said it believes a profit is possible in 2010.

GM also reported a $3.4 billion fourth-quarter net loss and said it is committed to repaying the outstanding balances on its U.S. Treasury and Export Development Canada loans by June “at the latest.”

Completing the “fresh start” accounting process lays the groundwork for GM to launch an initial public offering that would reduce the U.S. government’s majority stake in the automaker. The timing of an offering is unclear.

“Completing fresh-start accounting is an important step in that process,” GM Chief Financial Officer Chris Liddell said in a statement on the possibility of returning to public ownership.

GM said that going public would enable the automaker to invest in vehicle designs and sales, attract the best people and gain access to the capital markets. (Reporting by Soyoung Kim, David Bailey and Bernie Woodall, editing by Gerald E. McCormick)

(This report contains items about companies both in bankruptcy and not in bankruptcy. Adds Westland Devco in New Filings; Lehman and Barclays in Other Updates; Icahn’s Trump Entertainment in Briefly Noted; rental vacancy rates in Statistics; high-yield, high-risk debt issues in Commercial Debt Activity.)

By Carla Main

April 6 (Bloomberg) — Gems TV (USA) Ltd., the television retailer of gemstone jewelry products, yesterday sought Chapter 11 protection from creditors, citing as much as $500 million in debt. The television retailer of gemstone jewelry products, sought bankruptcy protection to sell its assets, after shutting down operations last month.

In papers filed in U.S. Bankruptcy Court in Wilmington, Delaware, the Reno, Nevada-based company listed less than $50 million in assets and said DirecTV was one of its largest unsecured creditors, owed $2.67 million.

DirecTV, based in El Segundo, California, the largest U.S. satellite-TV provider, asked a federal court last month to partially freeze Gems TV assets, the retailer said in a statement.

The company is seeking “an orderly liquidation of its assets,” Gems TV President Diane Schneiderjohn said in bankruptcy papers filed yesterday.

Schneiderjohn said the company’s “troubles were exacerbated this past year as nationwide economic conditions resulted in decreased discretionary spending.”

The case is In re Gems TV (USA) Ltd., 10-11158, U.S. Bankruptcy Court, District of Delaware (Wilmington).

For more, click here.

New Filings

New Mexico Developer Westland Devco Files Bankruptcy

Westland Devco LP, a New Mexico real estate developer, sought bankruptcy court protection after its lenders sued to foreclose on its assets.

The company, based in Albuquerque, New Mexico, listed assets of $361 million and debt of $198 million as of Dec. 31, in Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware.

Westland owns 55,000 acres of real estate in Albuquerque, which it planned to develop into residential lots, according to court documents. The company hoped to subdivide about 19,000 acres of that land into 40,000 parcels to sell to homebuilders over the next 20 years.

Barclays Capital Real Estate Inc., a unit of London-based Barclays Plc, sued Westland in December, seeking to foreclose on the project.

The case is In re Westland Devco LP, 10-11166, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Other Updates

New York Racing Appeal from Order Allowing OTB to File Chapter 9

The New York Racing Association has filed a notice of appeal from a March 22 order by U.S. Bankruptcy Judge Martin Glenn in Manhattan that granted the New York City Off-Track Betting Corp., or NYC OTB, permission to file for relief under Chapter 9 of the U.S. Bankruptcy Code, according to court files.

The Racing Association had objected to the request for Chapter 9 p