13 posts from September 2017

Thanks for the Warm Welcome

posted by Mitu Gulati

My thanks to the Slipsters, and particularly to Bob, Mark and Anna, for making me feel so welcome to your space already. I've long been a fan of the generous and supportive environment you have created and nurtured over the years. Serious and yet fun. I'm thrilled to be joining in and hope to live up to what you have already created.

Thanks also for the multiple emails sharing insights on the results of the SEC Gender Gap study already; especially from those of you who have worked in similar settings.

Elite Government Jobs, the Revolving Door, and the Gender Gap

posted by Mitu Gulati

We all know about the so-called revolving door where a few years of selfless government service translates into a high paying job in the private sector. The question my co authors, Steve Choi and Adam Pritchard, and I set out to ask was whether these goodies resulting from government service got allocated to men and women on a differential basis. 

A couple of days ago, we posted our preliminary results on this question in a paper titled "Should I Stay or Should I Go?".  We think they are intriguing, but would be delighted to get some feedback. 

Continue reading "Elite Government Jobs, the Revolving Door, and the Gender Gap " »

Welcoming Mitu Gulati

posted by Bob Lawless

Regular readers of Credit Slips will know that Mark Weidemaier will often co-post with Professor Mitu Gulati of Duke University. These posts, often on sovereign debt issues, are among our most widely read and commented upon. We are very pleased to announced that Mitu is joining as a permanent blogger. When trying to figure out how to introduce Mitu to our readership, I looked at his faculty bio, which is too good not to share in its entirety:

Mitu Gulati is a professor at Duke University. His research interests are currently in the historic evolution of concepts of sovereign immunity and the role that law can play as a symbol. He has authored articles in the Journal of Legal Studies, the Review of Finance and Law and Social Inquiry. He has won no awards, other than a second place finish in the fancy dress competition in 3rd grade (photo not available).

Characteristically, Mitu's bio is unduly modest. He is a very accomplished and prolific scholar who is well known within the legal academy. It is our honor and pleasure to have him join this often merry band of bloggers. We hope you enjoy his contributions.

ProPublica: The Bankruptcy System Fails Black Americans

posted by Bob Lawless

It's been a busy day, but before I sign off for the evening, I would be remiss not to flag Paul Kiel's outstanding piece that came out this morning, How the Bankruptcy System is Failing Black AmericansProPublica and The Atlantic co-published the article. An extensive data analysis also accompanies the article. Anyone who follows Credit Slips will want to read these pieces.

Kiel finds chapter 13 filings are about three times higher in predominately black zip codes as compared to predominately white zip codes. Of course, these findings very much parallel our earlier work, which I blogged about here back in 2012. Like our work, the disparities Kiel finds remain even after statistically controlling for financial and other variables that should determine chapter choice. Because chapter 13 is generally a more expensive choice than a chapter 7, requiring a payment plan that many debtors don't complete (and hence don't receive a discharge), the racial differences are troubling.

Where Kiel's article really shines are the interviews with the attorneys and bankruptcy debtors in Memphis, Tennessee. The interviews put faces and stories to the statistics that we can't do in academic studies. Check out Kiel's work.

Greatest Bankruptcy Case Name Ever?

posted by Adam Levitin

This morning I saw a docket for a bankruptcy case captioned In re Kabbalah Taxi, Inc.  Look for the cab with the little red thread around its mirror. If you meditate properly on the Tetragrammaton you will be teleported to your destination, although there are special fees for bridges and tunnels. I suppose the company competes with the Magic School Bus and the Chariot of Fire. Or it might just be a yeshivah bukher with a side job.

Any other great case names out there? Comments are open. 

Toys "Я" US's Curious Bankruptcy Venue

posted by Adam Levitin

Toys "R" Us filed for bankruptcy with impeccable timing--the very morning I was teaching my Financial Restructuring class about the commencement of the bankruptcy process. I decided to take my class through the TRU petition on PACER. Some 19 TRU entities filed in the Eastern District of Virginia, Richmond division. Only one of those 19 entities is a Virginia entity. I don't know the domicile of the other entities, but TRU is headquartered in New Jersey, and I'd be shocked if there wasn't at least one Delaware entity in the family.  

This left me puzzled. It would seem that TRU likely had at least two respected venues for large Chapter 11s:  District of New Jersey, and District of Delaware. Yet TRU chose to file in Virginia, and in Richmond to boot. 

After a few minutes of sleuthing on the LoPucki-UCLA WebBRD, I discovered that TRU's counsel, Kirkland & Ellis seems to have a cottage industry of Chapter 11 filings in Richmond:  5 cases in recent years. Again, this is puzzling. Richmond is hardly a convenient venue for K&E (with a bankruptcy practice based in Chicago and NY), nor is it a convenient venue for really anyone else--all of the financial creditors are likely to be NY-based, while the suppliers are from all over.  Nor is there obviously better law in the 4th Circuit for a retail bankruptcy (as far as I know, and if there is, it doesn't explain why Richmond rather than Alexandria). Are EDVA judges more lenient on fee applications or less likely to push back against overreaching DIP financing agreements? I don't know, but clearly there's something on tap in Richmond that K&E likes.  

Now here's what else I discovered--there are only two bankruptcy judges in Richmond, and K&E seems to keep getting the same one for its cases. I don't know how cases are assigned in EDVA, but it seems that K&E has discovered a sort of one-judge venue, much like Reno, NV. And what lawyer wouldn't want to pick the judge?  

I'm curious for others' thoughts.  I'd like to think that the chances of bankruptcy venue reform have increased with the departure of Joe Biden from the Senate (or Naval Observatory), not that we're likely to see any legislative action in the foreseeable future.  

WARN Act Claims after Spokeo v. Robins

posted by Adam Levitin

I'm musing out loud here, but does the Supreme Court's holding in Spokeo v. Robins—that a suit claiming statutory damages without alleging actual damages lacks Article III standing—impact WARN Act claims in bankruptcy? The WARN Act is a labor law that requires advance notice of certain plant closings--basically advance notice of mass layoffs. Failure to provide such notice results in statutory damages, even though there might not be any actual damages. For example, imagine that a debtor provided notice of a plant closing but not sufficiently in advance--it was one day too late. Where's the harm?  I think under Spokeo there wouldn't Article III standing for a suit seeking damages. If so, that's a nice boon to unsecured creditors because WARN Act claims are going to be priority claims that get paid ahead of them. Going foward, I would think that Official Committees of Unsecured Creditors should be challenging WARN Act claims. Thoughts?    

Visa's Maginot Line: Chip Cards and the Equifax Breach

posted by Adam Levitin

The media attention on the Equifax breach has been primarily on consumer harm.  There's real consumer harm, but it's generally not direct pecuniary harm.  Instead, the direct pecuniary harm from the breach will be borne by banks and merchants, and it's going to expose the move to Chip (EMV) cards in the United States without an accompanying move to PIN (as in Chip-and-PIN) to be an incredibly costly blunder by US banks.  Basically, Visa, Mastercard, and Amex have built the commercial equivalent of the Maginot Line. A great line of defense against a frontal assault, and totally worthless against a flanking assault, which is what the Equifax breach will produce.  

Continue reading "Visa's Maginot Line: Chip Cards and the Equifax Breach" »

Update on ABI Consumer Bankruptcy Commission

posted by Bob Lawless

This afternoon, I am off to New Orleans and the annual meeting for the National Association of Bankruptcy Trustees (NABT).  Tomorrow (September 15) from 12:30 - 2:30 PM, we are holding a public meeting for the Committee on Chapter 7 of the American Bankruptcy Institute's Commission on Consumer Bankruptcy. If you are at the NABT meeting, come and listen to our full schedule of fourteen speakers. The room location should be in the program and will be in the public meeting space for the conference.

If you would like to speak to us, there will be another opportunity for persons attending the National Conference of Bankruptcy Judges (NCBJ) in Las Vegas. The Committee on Case Administration & the Estate will be holding a public meeting at NCBJ on the morning of October 10. More information about requesting a time to speak is available at the call for participation. There also will be public meetings for the full Commission at the ABI's Wedoff Consumer Bankruptcy Conference to be held in November in Chicago, Illinois, and the Winter Leadership Conference to be held in December in Palm Springs, California.

Of course, you don't have to come to a meeting to send us your suggestions and comments. Anyone can send an email to ConsumerCommission@abiworld.og. I route all of those emails directly to the persons working on the issues raised as well as make them available to everyone involved with the Commission. Now is a particularly good time to write us as the committees are working on preliminary drafts. The topics the Commission is addressing are also available on our web site.

A Quiet Revolution in Pension Reform

posted by Jason Kilborn

A historic vote was announced overnight that signals a new era for large pension reform. As is often the case, "reform" here means that ordinary, hard-working folks will suffer a significant amount of pain as big companies are relieved of some liabilities, but the hope is it will be less painful than the alternative. The revolution began in 2014, when Congress adopted the Multiemployer Pension Reform Act (MPRA).  The Pension Benefit Guaranty Corporation guarantees a portion of the benefits due to participants in pension plans that have become insolvent, but as a result, it is also facing a nearly $100 million shortfall in its ability to cover the projected volume of its existing guarantees. Congress attempted to avert disaster by allowing particularly large and especially distressed pension funds to slash benefits themselves in order to maintain solvency. Ordinarily, this extraordinary action would, if possible at all, require an insolvency filing and court oversight of some kind, but the MPRA allows plans who aggregate benefits for many companies (multiemployer plans) to apply to the Treasury Department for administrative permission to abrogate their pension agreements and cut benefits with no court filing or general reorganization proceeding. There are, of course, restrictions on the level of distress required for such a move and the degree of proposed cuts, but the MPRA allows large pension funds to reduce the pension benefits of thousands of beneficiaries with simple administrative approval. The plan participants get a vote on such proposals, but the law builds in a presumption: Treasury-approved cuts go into effect unless a majority of plan beneficiaries votes to reject the cuts.

Continue reading "A Quiet Revolution in Pension Reform" »

Your Friendly Neighborhood Sanctions Running Strategy

posted by Anna Gelpern

We are about to hit an anniversary of sorts, a year since Venezuela was surely going to default on its debt ... except that it still hasn't, so the U.S. government has decided to nudge it along. Retroactive debt sanctions imposed on August 25 prohibit, among other things, extending new credit to the government of Venezuela and its state oil company PDVSA beyond 30 days and 90 days, respectively, as well as any transactions in previously issued government debt, and, separately, any direct or indirect, old or new bond-buying from the Venezuelan government. The sanctions are a big headache for U.S. bank compliance departments, but they also got some glorious creative juices running. Mark & Mitu offer a contrarian reading of the sanctions order and one of the general licenses issued by the Treasury's Office of Foreign Assets Control (OFAC) as part of its implementation. As M&M read it, Venezuela cannot restructure all its debt in a debt swap (that would require issuing new bonds), but it could amend some of its old bonds using collective action clauses (CACs), and gain breathing room until oil prices recover, things change, or pigs fly. 

Continue reading "Your Friendly Neighborhood Sanctions Running Strategy" »

Equifax: A Call for Public Utility Regulation of Consumer Reporting Agencies

posted by Adam Levitin

This post diagnoses what went wrong with Equifax and proposes a solution:  a public utility regulation regime for consumer reporting agencies in which the CRAs would be restricted in their ability to pay dividends and executive compensation unless they meet certain performance metrics in terms of reporting accuracy, dispute resolution, and data security.  Here goes: 

Continue reading "Equifax: A Call for Public Utility Regulation of Consumer Reporting Agencies" »

Do Sanctions Prevent Venezuela From Restructuring CAC Bonds?

posted by Mark Weidemaier

This is a joint post by Mitu Gulati and Mark Weidemaier.

At the end of last week, press reports noted that Mr. Maduro has given the green light for restructuring talks to begin with holders of Venezuelan debt. Curiously, the Russians may lead the talks. One question is whether bondholders subject to US jurisdiction can participate in a restructuring given recent sanctions levied by the Trump administration. Press accounts suggest that the sanctions were intended to prevent this. Bloomberg reports the sanctions were "designed to prevent investors from engaging in liability management, and, if Venezuela can't pay its debt, a restructuring." The Financial Times reports likewise, quoting a senior analyst who thinks the sanctions will work: "If these sanctions stay in place, then Venezuela cannot restructure."

We accept that the sanctions were intended to block a restructuring. But they don't seem to actually do this. There is a rather large loophole that would allow Venezuela to employ a common restructuring technique.

Continue reading "Do Sanctions Prevent Venezuela From Restructuring CAC Bonds?" »

Contributors

Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed

Categories

Bankr-L

  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

OTHER STUFF

Powered by TypePad