Hedge funds seeking to capitalize on Detroit's bankruptcy

Bankruptcy Law Primer for a Business

The opportunistic investors are looking to gamble by acquiring some of the citys distressed debt, sources said. They hope to turn a quick profit when Detroit emergency manager Kevyn Orr and bondholders reach a settlement in the future. It might be a good thing for Detroit to deal with hedge investors because they seek fast profits and are prone to quick settlements, allowing for the citys restructuring to get under way. In contrast, traditional bondholders and insurers are often more likely to fight aggressively to preserve their original investments and slow down the process. Full coverage: Detroits financial crisis In Jefferson County, Ala., which is currently working its way out of Chapter 9 bankruptcy, several hedge funds bought up the countys sewer bond debt at heavy discounts and struck a settlement for about 80 cents on the dollar. The arbitraging is already happening with Detroit debt but so far in a small way, said Andrew Schneider, CEO of West Palm Beach, Fla.-based Hedge Fund Advisors.
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Judge to rule on San Bernardino bankruptcy, pensions loom

When it filed for bankruptcy, it hoped to fetch more than $2 billion for about 1,100 patents related to digital imaging. But due in part to losses in high-profile patent litigation with Apple Inc, the company was only able to sell the portfolio for about $525 million to a consortium home page led by Intellectual Ventures and RPX Corp. The company sought other ways to save money. In April, it resolved a crucial dispute with its British pension, which dropped a $2.8 billion claim against Kodak while buying the company's personalized imaging and document imaging businesses for $650 million. The company reached an $895 million financing deal in June with JPMorgan Chase & Co, Bank of America Corp and Barclays Plc. It also plans a $406 million rights offering, selling 34 million shares, or 85 percent of the equity in the reorganized company, with proceeds going to creditors. But Gropper repeatedly denied their efforts to form a committee to represent their interests, saying it was clear there would be no value for them. Gropper's patience ran out however when he admonished one shareholder for asking what he felt were overly broad questions of Kodak executives about their methodology for the company's valuation. The Canadian shareholder spent close to an hour at the podium.
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Bankruptcy judge considers opening secret Detroit 'data room'

Unions representing workers have objected to the bankruptcy by arguing that it contravenes benefits' protection enshrined in Michigan's state constitution. LIKE A LAB TEST FOR DETROIT In both San Bernardino and Detroit, the idea of cutting back pension payments has set up a high-stakes battle between Wall Street bondholders and state pension funds over how they are treated when cities run out of money - an issue that could eventually find its way to the U.S. Supreme Court. "There is a real parallel between San Bernardino and Detroit," said Michael Sweet, a bankruptcy attorney with Fox Rothschild in San Francisco, who is not representing any party in the San Bernardino or Detroit cases. "Both cities have shown an appetite to take the pension issue head-on. If the judge rules San Bernardino eligible for bankruptcy, it opens the way for the city to propose a plan that could impair Calpers - which could put this little city ahead of what is happening in Detroit." Calpers has taken the opposite stance in the case of Stockton, another California city, which was found eligible for bankruptcy in April. Stockton has kept current on all payments to the pension fund. The judge overseeing the Stockton case has said that the question of whether Calpers remains to be paid in full under a bankruptcy plan could become an important issue when the city presents its exit plan.
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While it was not intended to be seen by the public, representatives from the city's unions and pension funds as well as corporate creditors have been given the password to it after agreeing to the nondisclosure agreement. On Wednesday afternoon, Jones Day attorney Gregory Shumaker made the offer to identify documents that should be kept from the public, in a change from insisting that all of them should remain private. Orr is a former member of Jones Day. He resigned from the firm to take the emergency manager position five months ago. At a hearing earlier on Wednesday at the federal courthouse in Detroit, Rhodes seemed to take umbrage when Shumaker said some of the financial information in the so-called room was not relevant to the city's Chapter 9 filing.
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US Judge Approves Kodak Plan to Exit Bankruptcy

After the debtor files a bankruptcy petition, the debtor is immediately protected by the automatic stay, which is an injunction that stops creditors from taking action against the debtor including collection efforts, lawsuits and foreclosures. Although the automatic stay is effective immediately upon the filing of the bankruptcy petition, it may be lifted in certain circumstances with court approval. Chapter 7 Bankruptcy: Liquidation Petitions filed under Chapter 7 of the Bankruptcy Code seek to liquidate the assets of the business. A bankruptcy estate that consists of all non-exempt assets of the debtor at the time of the filing of the petition is created and administered by a court-appointed trustee. The trustee will distribute the assets of the estate in accordance with the Bankruptcy Code. If successful, a Chapter 7 bankruptcy will lead to the discharge of the business's dischargeable debts. Not all debts are dischargeable. Chapter 11: Reorganization A company that wishes to continue its business will usually file a Chapter 11 bankruptcy which attempts to reorganize the debtor in such a manner that it will pay off some debts and discharge others, thereby making it feasible for the business to continue operations.
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