Eastman Kodak announced early Thursday that it and its US subsidiaries filed for Chapter 11 bankruptcy, reports Marketwatch. The firm said the move “is intended to bolster liquidity in the US and abroad, monetize non-strategic intellectual property, fairly resolve legacy liabilities, and enable the company to focus on its most valuable business lines.” The press release is on Businesswire. Units of the 131-year-old company outside the US are not affected by the action and would continue to meet their obligations to suppliers, the FT reports. The filing in the US gives the company protection from its creditors while it seeks to reorganise its finances and operations. Kodak has shed 47,000 jobs and closed 13 manufacturing plants and 130 processing labs since 2003. Bankruptcy would allow the company to act more quickly to shut unprofitable operations while cutting back on its pension obligations, according to bankruptcy lawyers. Read more
Eastman Kodak announced early Thursday that it and its US subsidiaries filed for Chapter 11 bankruptcy, reports Marketwatch. The firm said the move “is intended to bolster liquidity in the US and abroad, monetize non-strategic intellectual property, fairly resolve legacy liabilities, and enable the company to focus on its most valuable business lines.” The press release is on Businesswire. Read more
Kodak is in advanced discussions with Citigroup to provide bankruptcy financing, Bloomberg says, citing three people familiar with the matter. Kodak may seek protection from creditors within weeks and then hold an auction to sell its patent portfolio, said the people. Two of the sources said Kodak may seek about $1bn in debtor-in-possession financing, though terms may change, and one said advisers to Kodak are lining up a bidder that will be the frontrunner or so-called stalking horse bidder for the patent portfolio should the company file. Read more
Citing people familiar with the matter, the WSJ reports that Eastman Kodak Co is preparing a Chapter 11 bankruptcy filing, to be used if the sale of a portfolio of digital patents falls through. The company is in discussions to try to attain around $1bn of debtor-in-possession financing to keep the company operational through the potential bankruptcy proceedings. In securities filings in November, Kodak had warned that it was in danger of running out of cash if unable to sell the patents or raise additional loans. Shares in the company fell 18 per cent since the WSJ’s report was published mid-afternoon Wednesday. Kodak has struggled to reinvent itself, moving away from film sales towards commercial and consumer printers. The company had been trying to keep cash flowing in by means of patent lawsuits and licensing deals; a strategy which has ultimately failed to raise much-needed funds. Read more
A court has approved the remnant of Lehman Brothers to exit bankruptcy early next year, allowing pay-outs to creditors to begin soon after, reports Reuters. Lehman has some $65bn of assets under its three-year liquidation plan to meet the $450bn claims of its creditors. Judge James Peck called the bankruptcy the “most impossibly challenging” ever in approving the plan in court, Bloomberg says. Senior bondholders of Lehman will get 21.1 cents on the dollar back under the plan, compared to 16 cents in a rival proposal put together by creditors of Lehman’s affiliates. Read more
AMR Corporation, the parent company of American Airlines, filed for bankruptcy protection on Tuesday in an effort to shed its crippling debt burden and reduce its costs after losing ground to competitors over the past decade, the FT reports. Gerard Arpey, AMR’s long-serving chief executive, is also to retire, the company said. The filing ends of months of speculation about the future of the third-largest US carrier. Its shares have slumped after a run of quarterly losses even as its peers returned to profitability. American chose to forgo bankruptcy protection in the early 2000s while its rivals used the process to shed their pension plans and reduce structural costs, leaving it at a substantial disadvantage. Since then, companies such as United Airlines and Delta Air Lines, have only increased their lead. The two American rivals have trimmed their fleets, redesigned their networks and leapfrogged American through big mergers and acquisitions. Read more
The decision by a judge on Wednesday to throw out the bankruptcy filing of Harrisburg, Pennsylvania leaves the state poised to take over the finances of the beleaguered city. A group of city councillors had filed the Chapter 9 petition to protect the city from creditors. However, such an action was not consistent with established procedures that require all branches of the municipality “to be on the same page”, said Judge Mary France in court. The city’s major, state leaders, and bondholders had challenged the filing, which is now the 82nd municipal bankruptcy since 1980 that has been thrown out shortly after filing, the WSJ reports. Read more
A judge in the US approved the transfer of about $520m of MF Global customer funds on Thursday. The transfer represents 60 per cent of the $869m held in the accounts and will begin in about a week, the WSJ reports. This will also involved the transfer of some 22,000 client accounts to new dealers. There is a rising suspicion among those investigating the case that MF Global did not keep its clients’ accounts segregated but rather used the funds in them to meet margin calls in the days leading up to their bankruptcy filing. Using client assets in this way is something that is prohibited by the Commodity Exchange Act. The WSJ quotes a source as saying the MF Global had been using client assets during the trading day, but was returning it at the close. Something, however, went wrong with the transfers in the last few days that the firm was trading, according to the source. Read more
Chicago US Attorney Patrick Fitzgerald and New York US Attorney Preet Bharara have been busy issuing subpoenas in an effort to track down $600m in missing client funds at failed brokerage MF Global. A number of subpoenas were already issued in the immediate aftermath of the bankruptcy with the aim of preventing any records from being destroyed or lost. The Justice Department and FBI are also conducting criminal investigations into the collapse of the firm, though to date no one has been charged. In bankruptcy court on Wednesday, a lawyer for MF Global said they were being besieged by requests for information, reports the WSJ. Meanwhile, the CFTC is prioritising the return of client funds above all else. The office of the trustee sought permission on Tuesday night from the bankruptcy court to release some $520m to clients whose accounts have been frozen.
Two weeks after the bankruptcy of MF Global, some 33,000 customers still do not have access to their cash as the office of the trustee handling the liquidation continues to be unable to identify the location of some $600m that was meant to be in segregated accounts. In a bid to give previous clients of the broker access to at least some of their cash, the trustee, James Giddens, sought permission on Tuesday night from the bankruptcy court to release about 60 per cent of the cash in 21,000 frozen accounts, which would come to some $520m. However, a spokesman for the trustee’s office also said that it’s possible that customers simply never will get all of their money back due to a potential shortfall of funds, reports the WSJ. Read more
Jefferson County, Alabama, has filed for bankruptcy in the largest such municipal filing in US history. The record that had previously been held by Orange County, California which filed in 1994. The move late on Wednesday came after a deal with creditors owed more than $3bn ran into trouble in recent weeks, but caps years of trouble for the county, which includes Birmingham, the state’s largest city. “It was our only option,” Jimmie Stephens, a county commissioner, told the FT. “The citizens are demanding a resolution.” Default and bankruptcy have been rare for local governments in the US since the Great Depression, but fears of an increase have arisen over the past year as many local governments continue to struggle with the lingering effects of the latest US recession. However, the WSJ reports that the bulk of the debt relates to bond financing for sewerage under a deal that has been marred by corruption, with several officials already convicted. Read more
Dynegy, a US-based electricity company, has filed for Chapter 11 bankruptcy protection for some of its subsidiaries as part of a proposed debt restructuring agreement, as the fall in natural gas prices exacts a heavy toll on the power company, the FT reported. Dynegy Holdings, the subsidiary that owns most of the group’s debt with net debts of around $4.2bn, and four associated companies in the north-eastern US, filed for bankruptcy in New York on Monday evening. The listed parent and the subsidiaries that hold most of its power plants did not file for bankruptcy protection. The company has been received two failed takeover bids within the past year, the first from Blackstone and the second from Carl Icahn, an activist shareholder, the FT reported. Read more
MF Global became the largest US casualty of the eurozone crisis as it filed for bankruptcy protection after making big bets on the European sovereign debt market, the FT reports. The broker-dealer, run by Jon Corzine, an ex-chief executive of Goldman Sachs and a former New Jersey senator and governor, admitted defeat on Monday in its attempt to stay in business after an 11th-hour deal to sell itself to Interactive Brokers Group fell apart. It is the largest failure of a US financial firm since the collapse of Lehman Brothers in 2008. Several people close to the last-minute talks said due diligence raised questions about whether the firm’s commodities book was fully funded. They said the shortfall appeared to have been as much as several hundred million dollars. The Securities and Exchange Commission and the Commodity Futures Trading Commission said MF Global reported “possible deficiencies in customer futures segregated accounts held at the firm” as it told regulators a sale had fallen through. According to Bloomberg, the firm listed debt of$39.7bn and assets of $41bn in Chapter 11 papers filed on Monday. For more on the nature of MF Global’s proprietary flavoured repo-to-maturity trades which initially spooked the market, see FT Alphaville. Read more
Over the last week, news outlets and bloggers have discussed Bank of America’s move to shift derivatives exposures from its Merrill Lynch unit to its deposit-taking, FDIC-insured bank.
A Bloomberg article kicked the whole thing off: Read more
The Los Angeles Dodgers baseball team owned by Frank McCourt has filed for bankruptcy in a bid to prevent Major League Baseball from taking control of the storied but financially-troubled franchise, the FT says. As part of its Chapter 11 filing, the team has secured $150m in debt financing that will be available to fund continuing team operations. The loan is coming from Highbridge Principal Strategies, a unit of JPMorgan Chase. The LA Times says in order for club owner Frank McCourt to retain control of the Dodgers beyond Monday’s bankruptcy filing, he has to show he has the money to pay the current bills. Read more
A group of Lehman Brothers creditors including Paulson & Co has come under fire from rivals for a bid to have trades disclosed, says Bloomberg. Paulson’s creditor group is pressing for rivals to its liquidation plan to disclose how much they paid for Lehman debt before voting on its liquidation plan. Citigroup and Bank of America called the move a ‘fishing expedition’ and an ‘attempt to intimidate parties’ respectively. A liquidation plan led by Goldman would see investors repaid at 16 cents in the dollar whereas the Paulson plan envisages around 25 cents. Read more
Private equity firm Gores Group is in discussions to purchase more than half of Borders Group Inc.’s remaining stores out of bankruptcy, the Wall Street Journal reports, citing people familiar, in a deal that would keep the bookstore chain operating as a going concern. Borders, which filed for Chapter 11 in February, has been soliciting offers for the company amid mounting losses and tense discussions with publishers that ship books to the chain. Other suitors, whose identities couldn’t be learned, are also in discussions with Borders, the people said. Interest in Borders has picked up since Liberty Media’s recent bid for Barnes & Noble, which valued that chain at roughly $1bn, one of the people said. Read more
A new faction of Lehman Brothers creditors, including global banks and hedge funds, have signalled their intention to file a competing pay-out plan, should negotiations with the bankrupt investment bank break down, the FT reports. Lehman’s bankruptcy managers, the restructuring firm Alvarez & Marsal, presented a plan earlier this year to pay out $60bn against roughly $320bn in claims after selling assets such as the Archstone property group and subsidiary depositary banks. The plan reduced the pay-outs to creditors who traded derivatives with Lehman, such as Goldman Sachs, Credit Suisse and Deutsche Bank, in favour of paying more to investment funds that bought Lehman bonds in the months before its collapse in September 2008. A group of those bondholders, including Pimco, Paulson & Co and Calpers, last year filed a competing plan that would pay out even less to bank creditors. Read more
A US bankruptcy court judge has ruled that Barclays’ purchase of Lehman Brothers’ US broker-dealer was fair and should not be revisited, reports the FT. The court also ruled that the Lehman estate should turn over nearly $2bn still owed to Barclays as part of the deal. The defunct investment bank had sued Barclays in 2009 to recover some $13bn. Banking Times says Judge James Peck ruled that the sales process was fair under the circumstances, if imperfect. In reaching his decision, Peck took account of the level of systemic risk created by Lehman’s collapse and the extent to which this was curbed by Barclays’ acquisitions, the online publicationa dds. Read more
Borders has requested approval to close 200 of its 642 stores following a move into bankruptcy protection yesterday, Bloomberg reports. Borders has already won court permission to draw up to $400m of a $505m loan from lenders including GE Capital. In its bankruptcy court filing, Borders said it believed it still had “a sizeable core of profitable stores” that could prosper in a business that faces fundamental disruption, the FT reports. Borders also revealed that it has net debt of $1.29bn, including $303m owed to vendors and a $970m revolving loan facility, against $1.28bn in assets. William A. Ackman’s Pershing Capital, one of the biggest equity holders, still supports a potential merger with Barnes & Noble if enough stores are shed, the NYT says. Read more
The United States’ second-largest book store may file for bankruptcy this month or even as soon as next week, sources familiar with the matter have told Reuters and Bloomberg. The plan would likely involve Borders closing around 150 stores, while private equity groups are considering providing a junior loan, Bloomberg adds. Borders currently operates 650 stores. Moves toward filing for protection began in December, when the company warned that it faced a ‘liquidity shortfall’ at the start of 2011 after lenders reduced its borrowing capacity. A $550m financing commitment from GE Capital emerged in January, but is dependent on Borders restructuring stores and finding other lenders. Read more
Borders Group is preparing for a possible bankruptcy-protection filing as soon as mid-February or by the end of the month, reports the WSJ, citing people familiar with the matter. The struggling US bookstore chain is still finalising certain aspects of restructuring plans ahead of a potential filing, including financing that would keep it afloat in court and the number of stores it would close. Bloomberg earlier reported that Borders may file for bankruptcy protection as soon as next week. Under the bankruptcy plans currently under discussion, Borders would aim to close 150 to 200 stores, although that could yet increase. Read more
Lehman Brothers has revised its original plan for bankruptcy in order to offer bigger payments to bondholders, Reuters reports. Holders including Paulson & Co and Calpers had resisted the earlier proposal. Lehman’s new proposal will offer senior unsecured creditors 21.4 per cent of their claims, versus 14.7 per cent before, in return for their voting to accept the plan, reports the WSJ. The plan’s other big feature is to continue with original proposals to split Lehman into 23 separate subsidiaries, some of which will offer greater recoveries of assets than others. Bondholders’ rival plans had counted Lehman as a single unit. Read more
What’s good enough for GM is apparently good enough for California and Illinois.
That’s the argument made by University of Pennsylvania law professor David Skeel in an op-ed in Tuesday’s WSJ: Read more
A&P, one of the country’s oldest retail names, has filed for Chapter 11 bankruptcy protection following mounting losses at its 395 stores in the north-east and mid-Atlantic states, the FT reports. The company said in its filing that it was seeking more time to carry out a reorganisation of its regional supermarkets business in 2011, and was carrying $3.2bn in debt as of September, Reuters says. A&P has bled cash since a 2008 $1.3bn acquisition of Pathmark Stores. Regional grocery chains, most of which are unionised, have been struggling since the 1990s, when the emergence of discount chain Walmart led to a wave of industry consolidation, adds the FT. Read more
So the Lehman Bros estate has managed to clawback $500m worth of deposits from Bank of America — which means its sights are firmly set on its next legal pursuit.
Bloomberg, for instance, is currently running a story about the ‘next target’ of the Lehman estate — JP Morgan and its $8.6bn of collateral, plus billions in damages. At the centre of the legal argument sit things like safe harbor provisions for swaps. Read more