BANKRUPTCY UPDATES

• Minnesota Distillery of Fine Vodkas Files Chapter 7 Bankruptcy (February 10, 2012)
• Court Approves Newspaper Magnate Lee Enterprises’ Bankruptcy Plan (February 07, 2012)
• Suspected Felon Filed for Bankruptcy Shortly Before Untimely Death (February 09, 2012)
• Ireland Overhauls Bankruptcy Laws (February 06, 2012)
• IL State Representative Files for Chapter 13 Bankruptcy (February 08, 2012)

Bankruptcy Roundup: JPMorgan, Lehman and Tribune Co Cases Move Forward

JPMorgan asks for judge to drop lawsuit from Lehman

JPMorgan Chase & Co. has requested that a judge throw out the lawsuit that the bankrupt Lehman Brothers Holdings Inc. has filed against it, according to Bloomberg.

The lawsuit accuses JPMorgan chase of contributing to the monumental collapse of Lehman Brothers. Central to the lawsuit is the accusation that JPMorgan took advantage of the firm when it was in a weakened state.

The papers that requested the judge drop the case were filed in Manhattan bankruptcy court. The filings outlines how JPMorgan Chase was the only big bank that continued to offer Lehman Brothers a line of credit, even as the securities firm was on the edge of total collapse.

Lehman’s main complaint is that JPMorgan demanded almost $9 billion in real estate and illiquid securities as collateral for the credit that it extended during the market crash in 2008.

In March, the judge in the case approved the return of these billions in real estate and securities to Lehman from JPMorgan Chase. The bank, in turn, took back cash and collateral from Lehman.

In the request that the case be dropped, JPMorgan made the claim that they could have avoided exposing themselves to risk altogether if they had simply chosen not to extend credit to Lehman during their deepest crisis, according to Bloomberg. If it goes forward against the request of JPMorgan, the case is scheduled to go to trial in 2012.

“JPMorgan typically extended more than $100 billion in credit each day to LBI for the settlement and clearance of its securities transactions,” wrote the bank’s attorney in the filing.

Lehman Brothers filed the biggest bankruptcy in the history of the U.S. in 2008. It listed $639 billion in assets to set the record.

Tribune Co Sets a Bankruptcy Panel

The massive media conglomerate Tribune Co board has formed a committee that will oversee the large company’s bankruptcy proceedings. The bankruptcy had been unraveling, according to Reuters, following an investigation that looked into the company’s 2007 leveraged buyout.

Four independent directors will make up the committee. They were appointed following real estate mogul Sam Zell’s buyout of the company. The Jones Day law firm will advise the committee, the result of a court request.

According to Reuters, many blame the 2007 buyout for the ultimate bankruptcy of the company. Zell has referred to the buyout as the “deal from hell.”

Before the committee was formed, a group of bondholders and lenders was directing the bankruptcy. That arrangement fell apart, however, after an examiner found that lenders’ claims could be disqualified in amounts that added up to billions of dollars.

The examiner reported that it was “somewhat likely” that $3.6 billion of the debt in play in the bankruptcy could be found to be an “intentional fraudulent transfer,” according to Reuters. Unrest among lenders and creditors followed the finding leading to many disagreements and stalemate. The new committee is meant to help keep the process moving forward.

The committee includes Mark Shapiro, who shepherded Six Flags Inc through a bankruptcy filing. The four will be separate from the ten board members.

Tribune Co. lawyers told the bankruptcy court that they will file their own bankruptcy case without creditor input to try and end the long-dragging process.

Tribune Co owns the Chicago Tribune and the LA Times.