Archive for January, 2009

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House Passes Stimulus Bill, But Without Bankruptcy Provisions

Thursday, January 29th, 2009

The House of Representatives passed the $819 billion stimulus bill on Wednesday, a monster bill that allots money towards major infrastructure, education, health care, & unemployment concerns. One concern it does not address, however, is stemming the tide of foreclosures. From the Colorado Independent:

“Congressional Democrats hoping to use the economic stimulus package to force lenders to refinance troubled mortgages have met an unlikely opponent: President Barack Obama.

Many Democrats, including Obama, have long-supported the strategy of empowering bankruptcy judges to alter the terms of primary mortgages to prevent foreclosures. But White House officials have said they don’t want the bankruptcy provision in the stimulus bill for fear of alienating Republicans, most of whom oppose the change…Housing advocates have long-pushed to empower bankruptcy judges to reduce, or “cram down,” the balance of primary mortgages, as well as other terms of the loans, to keep homeowners from suffering foreclosure. That legal avenue is currently available for loans on commercial property, yachts, vacation homes — almost anything but primary mortgages, which were singled out for exception under bankruptcy law.”

Although both President Obama and Speaker of the House Nancy Pelosi have made it known that bankruptcy reform is a priority, and that they will make sure to attach bankruptcy reform provisions to a bill that is a “sure-fire” pass, it is unclear how many homes will foreclose in the meantime — and how many more residents of Orange County will seek a bankruptcy attorney because of it.

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Smurfit-Stone Seeks Bankruptcy Protection

Monday, January 26th, 2009

From the Orange County Register online:

“Smurfit-Stone Container Corp., the largest producer of cardboard box materials in North America, on Monday filed for Chapter 11 bankruptcy protection as it looks to restructure a heavy debt amid a global credit freeze…The company said it expects to continue operations during the bankruptcy process and has received commitments for up to $750 million in debtor-in-possession financing to fund continuing operations. Of that $750 million, some $350 million is new incremental financing, while the remainder represents replacement of existing credit.

Earlier this month, a report said Smurfit-Stone was actively exploring bankruptcy protection and had engaged a law firm and financial advisers with expertise in bankruptcy filings.

Analysts responded positively to the filing.

‘The main thing is that this was an expected event and overall being a Chapter 11, instead of a Chapter 7 filing, it is good for the company and good for the industry longer term,’ said Longbow Research analyst Joshua Zaret.”

Smurfit-Stone had a corrugated container facility in Fullerton, Orange County until last year, when it was sold.  It is possible that some of the many Orange County bankruptcy attorneys that abound in the area were prospectively culled to represent Smurfit Stone in their case.  We can only speculate about that, however, as the Orange County Register article does not disclose the name of the bankruptcy law firm retained for Smurfit’s bankruptcy case.

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Circuit City’s Bankruptcy to End in Liquidation

Monday, January 19th, 2009

After filing for bankruptcy in November, Circuit City will now have to shut down completely and liquidate its’ stores and assets after failing to find a buyer. Only a week ago, according to the New York Times report, there were two potential buyers in talks with Circuit City, but it was not able to reach an agreement with its creditors and lenders in time.

From the New York Times online:

“The demise of Circuit City, while not surprising given its declining sales, is part of a radical shift taking place in American retailing. Weak chains — unable to weather the freeze-up in consumer spending, and choked by tight credit markets — are shuttering their doors.

Last year, a raft of retailers including Boscov’s, Sharper Image, Mervyns, Linens ’n Things, Whitehall Jewelers and Steve & Barry’s filed for bankruptcy protection. This week alone, Goody’s Family Clothing and Gottschalks Inc. also filed. Many more retailers are expected to follow suit as they run out of working capital or are unable to finance their debt. But emerging from bankruptcy is harder than ever because of changes in the bankruptcy code and vise-like credit markets.

Indeed, Wall Street analysts said in November that the prospects of long-term survival for the Circuit City were bleak. Months of declining sales during the recession sent the company over the edge, although its problems go back a decade, from buying cheap real estate leases in inferior locations to laying off its most experienced sales staff. The latter saved money but cost the company employee morale and countless customers.

When the retailer filed for Chapter 11 bankruptcy in November, its shares had lost more than 90 percent of their value since the beginning of 2008.

The company is still awaiting final approval of the liquidation from federal bankruptcy court.”

As Circuit City stores will now be shut down, Orange County residents should make those last few trips to their nearby store. Circuit City locations in Orange County can be found in the following cities: Foothill Ranch, Fullerton, Huntington Beach, Irvine, Laguna Hills, Newport Beach, Orange, Rancho Santa Margarita, and Santa Ana.

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Orange County Couple Lists Debt of $345 Million in Bankruptcy

Thursday, January 15th, 2009

Whoever the Orange County bankruptcy attorney was for Mr. and Mrs. John Gantes, he or she had a lot of paperwork to go through, and lots of debt for which to account.

From the Orange County Register online:

“The preliminary numbers are in for the personal bankruptcy of John Gantes, who controls the Breckenridge Group and some 200 affiliates. He and his wife, Linda Bridgford Gantes (of the Bridgford Foods clan), filed papers in U.S. Bankruptcy Court in Santa Ana Tuesday listing assets of $2,697,466.81 against $345,313,071.99 in liabilities. The vast majority of the liabilities are unsecured.

Gantes filed separate Chapter 11 reorganization petitions for 25 of his businesses in November and December. He followed up with a personal Chapter 7 liquidation petition for himself and his wife. The personal case appears to be designed to cancel about $200 million in personal guarantees that Gantes signed on behalf of his businesses.

Major creditors include Farmers & Merchants Bank, which holds a $22 million third mortgage on the Gantes’ home in Laguna Niguel; the petition says the house really is worth $2,653,188.

Farmers & Merchants spokesman Evan Pondel said Thursday afternoon that the loan is secured by several commercial properties as well as the home. He would not say how many commercial properties secure the mortgage or how much they are worth.”

While the commercial properties securing the loan might be from Rancho Santa Margarita, Irvine, San Juan Capistrano, or even Tustin, this is one expensive Orange County home — leading to a big, fat, Orange County bankruptcy.

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Irvine Lender with $1 Billion in Assets Files for Bankruptcy

Monday, January 12th, 2009

From the Orange County Register online:

“BNC Mortgage, an Irvine-based subprime lender, filed for bankruptcy today to wind down its assets along with its parent Lehman Brothers, which also is bankrupt, reports Bloomberg.

The lender listed assets and debt of more than $1 billion each in its Chapter 11 petition in Manhattan. Here’s more from Bloomberg:

Lehman bought the unit, which specialized in subprime loans, in 2004, bringing it into the business which eventually led to the company’s demise. Lehman filed the biggest bankruptcy ever on Sept. 15, listing debt of $613 billion.

BNC joins another Lehman unit, Luxembourg-based Luxembourg Residential Properties Loan Finance, which filed for court protection in New York on Jan. 7. Both units want their bankruptcies consolidated with Lehman’s, according to court documents.

Consolidation is necessary ‘to experience a smooth transition into Chapter 11 with a minimum of delay, cost, and expense for the benefit of all parties in interest,’ lawyers for BNC Mortgage said in court documents.

BNC Mortgage, along with another acquisition, Aurora Loan Services LLC, were used by Lehman to create a steady flow of debt to package into bonds. In the first quarter of 2006, BNC was lending more than $1 billion a month.

Lehman closed the unit on Aug. 22, exiting the subprime business as it declared that the U.S. housing recession was far from over. Subprime loans, made to homebuyers with weak or limited credit histories, were cited by Lehman in its bankruptcy filing.

Luxembourg Properties and BNC Mortgage will seek consolidation with the Lehman case at a hearing Jan. 14.”

Other subprime lenders from the area that have been hit hard during this economic crisis include Option One Mortgage Company (headquartered in Irvine), BNC Mortgage (also headquartered in Irvine), and Argent Mortgage Co. (based in Orange).

Whether seen in the increase in Chapter 7, consumer bankruptcy filings or in the high-profile bankruptcy reorganization of a billion dollar company, it is clear that this crisis is still hitting Orange County hard. While mom and pop shops in cities like Lake Forest, Tustin, and Laguna Hills are struggling, so too are the corporations in Irvine and Newport Beach.

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Chapter 7 Bankrutpcy Filings for Orange County, December 2008

Friday, January 9th, 2009

Bankruptcy lawyers are needed in many cities, but perhaps in some more than others.

The Orange County cities with the most chapter 7 bankruptcy filings for the month of December, 2008, are as follows: Anaheim, Buena Park, Costa Mesa, Fullerton, Garden Grove, Huntington Beach, Irvine, Mission Viejo, Orange, and Santa Ana. Orange County cities that also had a high number, especially considering their relative population, include Laguna Hills, San Clemente, and San Juan Capistrano.

The total number of Chapter 7 bankruptcy filings in the Santa Ana Bankruptcy Courthouse during December 2008 was 605.

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Citigroup, Senators in Talks to Let Bankruptcy Judges Modify Mortgages

Thursday, January 8th, 2009

From DSnews online:

“New York-based Citigroup Inc. endorsed the proposed Senate bill that would give bankruptcy judges the power to modify mortgages with so-called ‘cramdowns,’ to force lenders to lower the burden on homeowners on Thursday, according to a story in The Wall Street Journal.

The “Helping Families Save Their Homes in Bankruptcy Act” was reintroduced to the Senate earlier this week by Illinois Democrat Sen. Dick Durbin, the Senate’s second-ranking Democrat. Durbin’s been working on the legislation for more than a year.

The deal, Senate staffers told The Wall Street Journal, is likely the first of several measures being crafted this year that propose to trim the principal owed by homeowners underwater on their mortgages.

‘This is the breakthrough we’ve been waiting for, to have a major financial institution support this legislation will create an incentive for others to come our way,’ Durbin told the Journal. ‘I want to congratulate Citi for being open-minded about this [and] playing a major leadership role.’

As written, the bill would allow judges to:

– Extend the length of repayment to lower monthly payments
– Replace variable interest rates with fixed rates
– Waive the bankruptcy counseling requirement for homeowners facing foreclosure to get homeowners in court faster
– Allow judges to waive prepayment penalties
– Maintain debtors’ legal claims against predatory lenders while in bankruptcy

A new component, added as a concession to lenders, would eliminate consumer loan forgiveness for lenders who have violated the Truth in Lending Act during bankruptcy proceedings, and would only subject lenders to fines.

Now that Citigroup has endorsed the deal, lawmakers hope other financial institutions will also offer their support. According to the Journal, some banks have indicated they would support the bill, marking a change of position for the industry, which previously argued cramdowns would raise the cost of mortgages for all buyers and overwhelm bankruptcy courts.”

Bankruptcy judges, and every bankruptcy attorney worth his salt, are hoping this measure passes, for the sake of millions of bankruptcy mortgage holders, thousands of whom live in Orange County. As Orange County bankruptcy attorneys can attest, the Santa Ana Bankruptcy Courthouse has seen it’s fair share of cases that could have been helped by this legislation. Here’s hoping Citibank leads the charge to finally get it done, and finally stem the tide of foreclosures in Orange County and across the country.

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