Archive for the ‘Bankruptcy News and Events’ Category

Dendreon Corp, the maker of the world’s first cancer vaccine, filed for bankruptcy protection this Monday.

The Chapter 11 bankruptcy has been filed as Dendreon faces an outstanding $620 million in convertible debt that is due in 2016. The Seattle-based company listed over $664 million in total debts and $364.6 million in assets.

The arrangement requires a recapitalization of Dendreon, or a sale of the company and all its assets, according to a statement released today. The company also indicated it had agreed on financial restructuring terms with several bond holders.

Provenge was approved in 2010 as the first immunotherapy and was intended to treat patients with advanced-stage prostate cancer. Drug sales never met its expectations as Provenge is difficult to administer and cost $93,000.

The treatment requires a patient’s extraction of white blood cells to be mixed with vaccine components. The combination is then provided as an infusion.

The high cost of manufacturing Provenge specifically hurt Dendreon and allowed several competitors to surpass the company.

Dendreon reported only $283.7 million in revenue in 2013, significantly smaller than 2012’s $325.3 million.

"The business is fundamentally unprofitable so, without a change to efficiencies in the manufacturing process, it's really difficult to see them coming back as a standalone company," according to Wedbush Securities analyst David Nierengarten.

Dendreon dispensed several staff and cost-cutting actions over the past years after the company realized revenue growth would take much longer than expected.

By summer 2014, it was clear that cost cutting alone would not make Dendreon "independently viable with its existing capital structure," according to general counsel Robert Crotty.

Shares of Dendreon plummeted Monday, dropping 70 cents to 24 cents in one afternoon of trading. The stock posted below $1 earlier this quarter, as compared to $2.99 at the close of 2013.

Dendreon said it plans to resume operations during the restructuring and will continue to provide Provenge to patients.

Friday, November 7th, 2014

Judge Approves Detroit Bankruptcy Plan

A federal judge ruled in favor of the Detroit bankruptcy plan, finalizing a 16 month process in which the city petitioned to file a Chapter 9 bankruptcy.

U.S. Bankruptcy Judge Steven Rhodes ruled that the Motor City’s complete restructuring plan is rational and achievable. Detroit now has legal authority to cut more than $7 billion in unsecured liabilities and put back $1.4 billion into public services over the next 10 years.

The decision allows Detroit to trim roughly 74 percent of its unsecured debt. Additionally, the plan expects probable cost savings via more effective government operations that might increase the city’s reinvestment plan to $1.7 billion.

Rhodes said that Detroit’s settlement with pensioners was a “miraculous” conclusion; he also overruled every objection to the city’s plan.

"This city is insolvent and desperately needs to fix its future," Rhodes said.

Rhodes also stated that Detroit made the correct decision to preserve the Detroit Institute of Arts instead of attempting to sell artwork to settle debts.

Today’s ruling ends the largest municipal bankruptcy in U.S. history; the city of Detroit is expected to officially emerge from bankruptcy within the next few weeks.

Detroit emergency manager Kevyn Orr made a statement regarding Rhodes’ decision:

"With Judge Rhodes's historic decision, Detroit moves further along the path toward financial stability and success as a viable and attractive place to live, work and invest. My team and I are pleased that Judge Rhodes agrees that the Plan is the best way for the City to resolve its financial difficulties and remain on solid financial footing.”

Detroit’s two major financial creditors, Syncora and Financial Guaranty Insurance Co. initially fought the city’s petition, arguing that the filing illegally favored pensioners over other creditors. However, both institutions dropped their objections after reaching settlements with the city.

The remaining creditors supported the plan and pensioners voted to accept the deal over a 60-day balloting process this summer.

Orr’s tenure in Detroit will now end with the conclusion of the city’s bankruptcy filing. General control over the city will return to Mayor Mike Duggan and the City Council.

A Financial Review Commission, staffed by gubernatorial appointees, will oversee the city’s finances over the next decade.

Tuesday, October 28th, 2014

Closing Arguments in Detroit Bankruptcy Trial

The historic Detroit bankruptcy trial came to a close on Monday when city attorneys gave closing arguments as to why U.S. Bankruptcy Judge Steven Rhodes should approve the city’s bankruptcy plan.

Judge Rhodes is expected to announce his ruling on November 7.

Closing arguments highlighted the necessity to pass the debt-cutting plan, which would free Detroit from $7 billion in debt and open up money to improve city services.

The City of Detroit filed for bankruptcy in June 2003, claiming to owe over $18 billion in debt. The bankruptcy plan was revealed earlier this year: it aims to restructure and settle debts through several different severe measures, including reducing city employee pensions.

Funding of roughly $200 million will come from Michigan taxpayers and due to an agreement to not sell off art pieces from the Detroit Institute of Arts, the city will received nearly $500 million from private and corporate donors.

City lawyer Bruce Bennett identified the greatest risks that would stop Detroit from executing the debt-cutting strategy. He stated the plan could collapse if city leaders strayed from the plan to invest $1.7 billion.

"The worst thing that could happen is if the $1.7 billion is misused or perceived to be misused," Bennett said. "Either would be an enormous problem."

Detroit filed a Chapter 9 bankruptcy case, which is similar to the proceedings of a Chapter 11 business bankruptcy case. However, a main difference is the inability to liquidate assets if Judge Rhodes does not approve the plan.

"In Chapter 9 you have to have consensus because there's really no viable alternative," said John Pottow, professor of law at the University of Michigan. "If this plan gets shot down, you can't liquidate Detroit -- so it's literally just back to the drawing board.”

If Judge Rhodes approves Detroit’s bankruptcy, Bennett believes the city can start executing the plan before Thanksgiving.

Tuesday, October 21st, 2014

Wyly Bankruptcy: Tycoon Owes $400 Million

Texas entrepreneur Samuel Wyly has filed for bankruptcy on Sunday, stating he does not own the assets to pay roughly $400 million in penalties for an overseas fraud scheme.

According to the Chapter 11 petition, Wyly stated he had assets and debt between $100 million and $500 million. He attributed his debt to the “massive costs of investigations and then litigation” by the Securities and Exchange Commission.

“While the debtor has substantial assets, he does not have the ability to pay the full amount of all asserted claims at the present time,” according to the filing.

A New York judge ruled last month that Wyly, 80, and the estate of his late brother, Charles, must forfeit up $187.7 million plus interest. In May, a civil jury found they were involved in a 13-year fraud scheme in which they used offshore trusts and subsidiaries to conceal stock sales.

It is believed the Wylys accrued upwards of $550 million in untaxed earnings through their system, which lasted over a decade.

The SEC is listed as Wyly’s second greatest creditor, with a claim of $198.1 million, according to court documents. Wyly listed the Internal Revenue Service as his biggest creditor, with disputed debts “unknown.”

Depending on how interest is calculated, the total payment owed by Wyly and his late brother’s estate will fall between $300 million and $400 million.

The Wylys created, grew and sold numerous companies since the 1960s. Their most noted companies include Sterling Software and Michael’s craft stores, which were both sold for $4 billion and $6 billion, respectively.

The SEC stated the Wylys used profits from secret stock sales in several of their companies to purchase real estate in Aspen, Colorado, a horse farm in Texas, jewelry and art. The brothers were also major donors to many Republican candidates and politicians.

In 2010, Wyly appeared on Forbes’ list of the 400 richest Americans, with an estimated new worth of $1 billion.

Outside of the filing papers, there is no official statement on the Wyly bankruptcy at this time.

A U.S. bankruptcy judge has dismissed the case of a Colorado marijuana business owner, stating that while he is in compliance with state law, he is breeching the federal Controlled Substances Act.

Frank Arenas, wholesale distributor and producer of marijuana, was seeking Chapter 7 bankruptcy protection. According to his petition, he owes $556,000 to unsecured creditors.

He testified he owns roughly 25 marijuana plants, each valued at $250, which Arenas would have liquidated into payments in his Chapter 7 case. However, the trustee could not take control of the plants without breaking federal law.

Additionally, Arenas’ case could not be converted to a Chapter 13, which would permit him to pay off his debts gradually, because, as Judge Howard Tallman writes, the agreement would be financed “from profits of an ongoing criminal activity under federal law.”

"Violations of federal law create significant impediments to the debtors' ability to seek relief from their debts under federal bankruptcy laws in a federal bankruptcy court," Judge Tallman added.

Arenas’ case the second marijuana business bankruptcy dismissed in Colorado including a marijuana business; a least two other cases have been discharged in California.

The inability to file for bankruptcy is one of many issues marijuana business owners currently face.

Forbes reported last week how many banks are leery to deal with marijuana businesses because of potential legal problems they could face. Bank personnel could be prosecuted for a number of crimes, such as money laundering or marijuana conspiracy, and face up to 10 year mandatory minimum sentences, depending on the amount of pot in question.

At this time, marijuana business owners will be caught between state and federal law, according to Sam Kamin, a law professor at University of Denver.

"As long as it is illegal under federal law, we are going to have weird anomalies like that," Kamin said.

Arenas is appealing Judge Tallman’s decision.

Detroit reaches a settlement with its greatest opponent, bond insurer Syncora Guarantee Inc., this Monday, according to a lawyer for the city.

Under the deal, Syncora will recover roughly 14 percent of money owed, which they've long claimed totals more than $333 million. Syncora will receive two sets of notes from Detroit, a lease to control a tunnel to Canada, land near the tunnel, and the possibility of leasing and controlling a parking structure.

With this settlement, Syncora is fully exiting the Chapter 9 bankruptcy case, including any future appeals.

David Heiman of Jones Day, a lawyer for Detroit, said to U.S. Bankruptcy Judge Steven Rhodes in Monday’s hearing that both parties have “laid down their swords.”

While the agreement with Syncora is an important cleared hurdle for Detroit’s bankruptcy emergence, the city still faces creditor Financial Guaranty Insurance Co., who is seeking roughly $1.1 billion from the pension debt it insured.

On Monday, FGIC asked Judge Rhodes to suspend the trial until September 22 so the company can modify its approach in the wake of Syncora’s settlement. The trial is currently on hold since last week so Detroit and Syncora could finalize their deal.

Detroit’s Grand Bargain is centered around an estimated $816 in pension debt. FGIC may be held responsible for payment if investors end up taking losses.

The Grand Bargain aims to relieve $7 billion in liabilities while supporting state retirement arrangements from state and private contributors. Detroit has guaranteed it will not sell off any pieces from its art collection to pay back any debts.

Syncora apologized in a court filing Monday. The company has been a longtime adversary in the case and recently accused court appointed mediators of inappropriate conduct and conflict of interest.

Because of the apology, Rhodes has stated he will no longer sanction Syncora in its attorneys.

Wednesday, September 10th, 2014

Trump Casinos Company Files for Bankruptcy

Five of Atlantic City’s 12 casinos could close by the end of this year when Trump Casinos Company files for bankruptcy this month.

The company owns Trump Plaza, a casino slated to close next week. Trump’s Taj Mahal could follow suit in November if the company cannot receive concessions from union workers.

According to paperwork filed with the U.S. Bankruptcy Court Tuesday, Trump Entertainment estimates its liabilities range between $100 million and $500 million and assets no greater than $50,000. The company missed last quarter’s tax payment and currently does not have enough revenue to pay lenders this month, as reported by the Washington Post.

In a statement to the New York Times, Fitch Ratings analyst Alex Bumazhny indicates the Taj Mahal closure comes as a surprise: “The property is almost breaking even and will benefit from the closure of Trump Plaza.”

Three casinos have closed since January in lieu of increased competition from neighboring states. On CNBC’s “Closing Bell,” financial researcher Frank Fatini claims new casinos in Pennsylvania and New York state have “taken away…the convenience gambler, the ‘daytripper’”from Atlantic City.

Bloomberg states that higher labor costs and real estate taxes have also hurt Atlantic City’s profits.

The closing of the Taj Mahal could leave 2,800 workers unemployed, raising the year’s total loss in Atlantic City casino jobs to above 8,000.

On Monday, New Jersey governor Chris Christie assembled a meeting of elected officials, casino executive and union leaders to discuss Atlantic City uncertain future.

“A whole bunch [of] people are getting put out of work with nothing else on the horizon,” said state senator and former city mayor James Whelan. “You now have the possibility of five empty buildings on the boardwalk.”

Trump Entertainment has struggled since its 2010 bankruptcy. Billionaire investor Carl Icahn currently holds a $289 million loan, rendering him the company’s largest credited investor.

Donald J. Trump owns a 9 percent stake in the company but has no connection with operations. Trump has a current lawsuit to remove his name from the properties.

Thursday, September 4th, 2014

Detroit Bankruptcy Trial Begins

Testimony in the historic Detroit bankruptcy trial began this morning with the city’s chief financial officer stating fiscal controls were “very, very poor” when he began last year.

John Hill Jr. was the first witness called on September 4. According to Hill, Detroit was unable to fully determine revenue flow for a myriad of reasons, but partly due to a failure to implement a “financial commuter system,” as said by ABC News.

Lawyers for the United Auto Workers, Wayne County and the American Federation of State, County and Municipal Employees are also slated to present their arguments on Thursday.

On Wednesday, lawyers argued against Detroit’s current debt modification plan, claiming it to be “illegal, unfair and dead on arrival,” according to an article in the Detroit Free Press.

Judge Steven Rhodes compelled a lawyer for Syncora Guarantee, arguably the city’s strongest critic and creditor, to state what he felt is an appropriate amount for the city to repay. Attorney Kieselstein said Syncora wants 75 cents on the dollar.

Detroit’s Grand Bargain is the foundation of the bankruptcy plan. The bargain would allow the city to accept roughly $816 million over the next 20 years from the state of Michigan, non-profit foundation and the Detroit Institute of Arts donors. The money would be used to fund city retiree pensions.

Bond insurers claim the Grand Bargain illegally discriminates against commercial creditors. Syncora claims it is owed $400 million.

Rhodes has scheduled the trial into mid-October to give enough time to determine the fairness of the Grand Bargain and what is most reasonable for all parties. City leaders, including Mayor Mike Duggan and emergency manager Kevyn Orr, are expected to testify throughout the trial.

Detroit filed for Chapter 9 bankruptcy protection July 18, 2013, claiming debts and estimated long-term liabilities totaling $18 million.

Thursday, August 28th, 2014

Crumbs Bake Shop will reopen after sale

Crumbs Bake Shop will reopen after sale to Lemonis-Fischer Enterprises in a New Jersey bankruptcy court on Tuesday.

Judge Michael Kaplan approved the sale of the famed cupcake chain to Marcus Lemonis, star of CNBC’s “The Profit,” and Fischer Enterprises, which is best known as the owner of frozen treat Dippin’ Dots. The purchase will successfully conclude Crumbs’ Chapter 11 bankruptcy case, annulling $6.5 million in debt, according to the Wall Street Journal.

Crumbs closed all 49 of its locations nationwide in July. About half of those locations will remain closed, but new ownership intends to reopen stores in cities such as New York, Chicago, Washington D.C., Boston and Los Angeles.

Scott Fischer, chief operating officer of Fischer Enterprises, states the stores will still focus on Crumbs’ famed cupcakes, but there are plans to integrate other food brands owned by the Oklahoma based investment company, such as ice cream and popcorn.

Crumbs began searching for a buyer in late 2013, but a $5 million investment from Fischer Enterprises in January 2014 temporarily halted the search. Filings show the company resumed hunting in May after an “out of court restructuring failed to take hold,” as stated by The Wall Street Journal.

Unsecured creditors of the company now have little options for recovery of money. However, it is possible a creditor committee could attempt lawsuits against unspecified parties in an effort to recoup their losses.

CEO Edward Slezak is slated to maintain his position through the end of the year. Crumbs also expects to rehire previous employees who lost their jobs in the July closings.

"The court is pleased to see there will be employees going back to work, and that there will be certain landlords with continuing tenants," said Judge Kaplan.

Crumbs opened its doors in 2003 in a small shop on the Upper West Side of Manhattan. Jason and Mia Bauer, husband and wife entrepreneurs, quickly expanded their line of signature cupcakes throughout the continental U.S. with up to 79 stores.

After a rapid growth, the company went public in 2011 and soon faced hardship after years of losses and a decline in capital.


After waiting almost six years, unsecured creditors of Lehman Brothers Holdings' Inc. will finally see an initial payment of $4.62 billion next month.

Trustee, James Giddens, filed a notice August 15th regarding the distribution of owned payment to Lehman's creditors. Former employees, pension funds, banks and investment firms are among the creditors who will see money starting September 10th.

The payment denotes roughly 17% of total unsecured claims against the brokerage, according to the Wall Street Journal.

Lehman Brothers Inc. filed for Chapter 11 bankruptcy protection on September 15, 2008. The firm's filing was the largest bankruptcy in US history and is generally credited as a major turning point in the 2008 financial collapse.

Upon filing, Lehman claimed $613 billion in total debt and $639 in total assets, as well as $150 billion in outstanding bond debt according to a 2008 article on MarketWatch. The firm listed over 10,000 creditors in the filing.

The upcoming September payment has been postponed until the brokerage's customers were fully reimbursed: $105 billion to 111,000 former customers, according to Reuters. The 1970 Securities Investor Protection Act put into law that customer claims are to be fully repaid before creditors.

"That such a distribution is even possible represents an extraordinary achievement that was far from certain when the liquidation began," Giddens said in a news release Friday.

Additional payments are likely in the future, Giddens stated. After the initial payment to creditors, Lehman will have paid over $110 billion; $20.4 billion in claims have been processed against the brokerage and $6.8 billion in claims are still unsettled, according to the Wall Street Journal.

On August 5th, Barclays Plc. was allowed to keep about $6 million of disputed assets after its speedy purchase of the bulk of Lehman -- money Giddens was attempting to recover.

Lehman was Wall Street's fourth largest investment bank before the 2008 Chapter 11 filing.