By: Ramona Ortega In a rare event, the Bankruptcy Court for the Northern District of Texas (“Bankruptcy Court”) refused to extend comity to a Mexican court and declined to enforce an order for a plan of reorganization for Vitro, S.A. B. de C.V. (“Vitro”). The Bankruptcy Court found the plan manifestly contrary to the public policy of the United States under Section 1506 of the Bankruptcy Code. Under the Mexican plan, bondholders will receive approximately 40 cents on the dollar, while debtors retain $500 million in equity, and non-debtor subsidiaries will be released from their guarantees–contrary to U.S. bankruptcy practice. …
Author: Online Managing Editor
By: Ramona Ortega The municipal bond market is quickly becoming the latest entity to be impacted by the lingering housing and financial crisis. In June, Stockton, California became the latest city to head to bankruptcy court to sort out its financial woes and is hoping to be the first city to impose losses on bondholders in its plan of reorganization. As more cities, reeling from high foreclosure rates and a reduced tax base, file for Chapter 9 municipal bankruptcy protection, muni bondholders are becoming increasingly concerned that Stockton’s plan could create an unsettling precedent. The automatic protections in the Bankruptcy…
By: Luis Calvo On July 2, the Federal Reserve released public versions of the resolution plans or “living wills” of nine large banks. Living wills contain a blueprint of large financial institutions to be used to determine how the institution would maneuver financial instability without affecting the market at large. Section 165 of the Dodd-Frank Act imposed numerous rules on banks and bank holding companies to avoid the “too big to fail” market hazards caused by the Lehman and Bear Stern collapses.[1] These new rules included capital and liquidity requirements, stress tests, overall risk management requirements, and concentration limits, among…
By: Jared Sorin Although summertime is normally characterized by beaches and swim suits, this past June has seen a number of significant developments in lawsuits concerning big names in the financial industry. While the rest of us have been enjoying the sunshine, the United States government has continued to work tirelessly to pursue suits against insider trading and fraud. On June 15th jurors found Rajat Gupta, a former director at Goldman Sachs and Proctor & Gamble Co., guilty of insider trading. Gupta was convicted on three counts of securities fraud and one count of conspiracy for sharing non-public information with…
By: Jared Sorin The Facebook IPO fiasco already is the subject of innumerable articles, blogs, tweets, and analyses. Virtually all of the discussion centers, however, on the obvious: Facebook (the issuer), Morgan Stanley (the lead underwriter), Nasdaq (the security exchange) and the investors who saw immediate decline in value. Take a step back and we see that the collateral damage from the Facebook IPO fiasco may be far more important and of a significantly more material magnitude. One analyst recognizes that the Facebook IPO fiasco has left “an unthinkably wide swath of scorched earth in its path.” The Facebook IPO…
By: Thomas Michael There is nothing more embarrassing for a baseball player than an unforced error – especially when that error consists of tripping over your own feet, falling on your face, and getting hit in the back of the head by the ball you were supposed to catch easily. This is the essence of what happened to BATS Global Markets in its major league debut. And the BATS IPO disaster may have far reaching consequences for both the company and other high-frequency trading platforms that are the focus of a recent SEC probe. BATS is currently the third largest…
By: Matt Dobleman As was the case for many previous airlines that declared for Chapter 11, American Airlines’ labor costs under union contracts were a prominent reason for seeking bankruptcy protection. Tom Horton, chief executive of American, stated that American Airlines’ labor costs exceed that of its major competitors by roughly $800 million a year. These labor costs consist of, among other things, the highest pensions in the industry. Other airlines were able to reduce such costs by seeking bankruptcy protection in the past in order to restructure their own expenses and increase profitability. Under Section 365 of the Bankruptcy…
By: Jaren Sorin In yet another example of the growing importance of the technology sector to the metropolitan area, March 2012 marks thirteen consecutive months in which New York City and the surrounding area posted the largest volume of new technology jobs created throughout the United States. The increased focus on technology throughout media and communications companies, combined with a dramatic upsurge in new startups in the metropolitan New York/New Jersey area, has translated into a substantial number of new jobs. According to dice.com, after considering new tech job postings this month, NY has been the frontrunner for over a…
By: Thomas E. Holber The Commodities Futures Trading Commission (the “CFTC”) adopted rules on March 20th designed to raise competition and mitigate risk in derivatives markets. Overall, however, the main thrust of the rules is to encourage migration of much of the derivatives market onto central clearinghouses. Several features of the rules encourage competition. A key requirement is that a trade between two counterparties must be confirmed within minutes of its execution. Previously, confirming a trade could take hours or days. Requiring immediate clearing provides market participants confidence in the counterparty on the other side of the trade. Under an…
By: Kirill Kan According to a per curiam opinion issued by the Court of Appeals for the Second Circuit on March 15, 2012, Judge Jed Rakoff’s rejection of the SEC’s $285M settlement with Citigroup is likely to be overturned. In November of last year, Judge Rakoff, United States District Court Judge for the Southern District of New York, firmly rejected the SEC’s proposed $285M settlement with Citigroup over the sale of mortgage-related investments before the financial crisis on the basis that the settlement involved no admission of guilt by Citigroup and provided a sparse record by which to make a…